**U.  S.  SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C.  20549**





**FORM
      10-KSB**





Annual
      Report Under


Section
      13 or 15(d) of the


**Securities
      Exchange Act of 1934**





For
      the
      fiscal year ended


June
      30,
      2007





Commission
      file number


000-03718





**PARK
      CITY GROUP, INC.**


(Exact
      name of registrant as specified in its charter)





Nevada
            37-1454128(State
                or other jurisdiction of incorporation)
            (IRS
                Employer Identification No.)





3160
      Pinebrook Road, Park City, Utah 84098


(Address
      of principal executive offices)





(435)
      645-2000


(Registrant's
      telephone number, including area code)








**Securities
      registered pursuant to Section 12(b) of the
      Act:  None**





**Securities
      registered pursuant to Section 12(g) of the Act:  Common Stock ($0.01
      par value per share**





Title
                of each Class
            Name
                of each exchange on which registeredCommon
                Stock, $.01 Par Value
            Over-the-Counter
                Bulletin Board





Outstanding
      as of September 28, 2007


8,960,703
      Shares (662 shareholders)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
      (or
      for such shorter period that the registrant was required to file such reports),
      and (2) has been subject to such filing requirements for the past 90
      days.  (1) [ XX ] Yes [ ] No ;  (2) [XX] yes [  ]
      No.





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B is not contained in this form , and no disclosure will be
      contained,  to the best of registrant's knowledge, in definitive proxy
      or information statements incorporated by reference in Part III of this Form
      10-KSB or any amendment to this Form 10-KSB.  [X]





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).  Yes [ ] No [X]





The
      issuer’s revenues for the year ended June 30, 2007 were $2,592,166.





The
      aggregate market value of the stock held by non-affiliates of the registrant
      is
      approximately $9,610,000, calculated using a price of $3.10 per share on
      September 27, 2007.








1





**Forward-Looking
      Statements**


This
      annual report on Form 10-KSB contains forward looking statements.  The
      words or phrases “would be,” “will allow,” “intends to,” “will likely result,”
“are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or
      similar expressions are intended to identify “forward-looking
      statements.”  Actual results could differ materially from those
      projected in the forward looking statements as a result of a number of risks
      and
      uncertainties, including the risk factors set forth below and elsewhere in
      this
      report.  See “Risk Factors” and “Management's Discussion and Analysis
      of Financial Condition and Results of Operations.”  Statements made
      herein are as of the date of the filing of this Form 10-KSB with the Securities
      and Exchange Commission and should not be relied upon as of any subsequent
      date.  Unless otherwise required by applicable law, we do not
      undertake, and specifically disclaims any obligation, to update any
      forward-looking statements to reflect occurrences, developments, unanticipated
      events or circumstances after the date of such statement.





**PART
      I**


**Item
      1.  Description of Business**





**General**





Park
      City
      Group develops and markets patented computer software and profit optimization
      consulting services that are intended to help its retail customers to reduce
      their inventory and labor costs; the two largest controllable expenses in the
      retail industry.  The technology has its genesis in the operations of
      Mrs. Fields Cookies co-founded by Randall K. Fields, CEO of Park City Group,
      Inc.  Industry leading customers such as The Home Depot, Anheuser
      Busch Entertainment, Perdue, Monterey Mushrooms, Pacific Sunwear, Wawa and
      Tesco
      Lotus benefit from the Company’s software.  Because the product
      concepts originated in the environment of actual multi-unit retail chain
      ownership, the products are strongly oriented to an operations’ bottom line
      results.





**The
      Company was incorporated in the State of Delaware on December 8, 1964 as
      Infotec, Inc. From June 20, 1999 to approximately June 12, 2001, it was known
      as
      Amerinet Group.com, Inc.**In 2001, the name was changed from Amerinet
      Group.com to Fields Technologies, Inc. ****On June 13, 2001,
      the Company entered into a “Reorganization Agreement” with Randall K. Fields and
      Riverview Financial Corporation whereby it acquired substantially all of the
      outstanding stock of Park City Group, Inc., a Delaware corporation, which became
      a 98.67% owned subsidiary.   Operations are conducted through
      this subsidiary which was incorporated in the State of Delaware in May
      1990.  The Company develops and licenses its software applications
      identified as “Fresh Market Manager”, “Supply Chain Profit Link”, and
“ActionManagerTM”.  The Company also provides implementation and profit
      optimization consulting services for its application products.





On
      August
      7, 2002, Fields Technologies, Inc., (OTCBB:FLDT) changed its name from Fields
      Technologies, Inc., to Park City Group, Inc., and reincorporated in
      Nevada.  Therefore, both the parent-holding company (Nevada) and its
      operating subsidiary (Delaware) are named Park City Group, Inc.  Park
      City Group, Inc. (Nevada) has no other business operations other than in
      connection with its subsidiary. In this Annual Report Form 10KSB when the terms
      “we”, “Company” or “Park City Group” are used, it is referring to the Park City
      Group, Inc., a Delaware corporation, as well as to Fields Technologies, Inc.,
      the Delaware Corporation, which was reincorporated in Nevada under the name
      of
      the Park City Group, Inc.  The stock trades under the symbol
      PCYG.





On
      the
      11th day of
      August 2006, the company effected a 1 for 50 reverse stock split.  All
      trading price information set forth gives effect to such reverse stock
      split.





The
      principal executive offices are located at 3160 Pinebrook Road, Park City,
      Utah
      84098.  The telephone number is (435) 645-2000.  The website
      address is http://www.parkcitygroup.com.





**Supermarket**




The
      Supermarket industry is under increased competitive pressure from Value
      Retailers such as Wal-Mart, Costco, Target, and others.  One of the
      strategies that traditional supermarkets are implementing is to increase the
      quantity and quality of their perishable offerings.  Perishable
      departments, such as bakery, meat and seafood, dairy, and deli have historically
      been loosely managed but now have been forced to become a focus for
      profitability improvement.  The Company’s software and consulting
      services and change management resources are designed to address this specific
      business problem; increasing the profitability of perishable products at the
      department and store level.




**Convenience
      Store**




For
      Convenience Stores, recent trends of contracting gasoline sales margins and
      declining tobacco sales further increases the need for improved cost controls,
      focus on product mix, and better decision support.  To intensify the
      focus on these issues, other industry segments such as value retailers and
      grocery stores have begun cutting into the convenience store stronghold by
      offering gasoline, a product that once was monopolistic to the convenience
      store
      retailer.  In response to declining gasoline sales and profits, the
      C-Store industry is pushing into Fresh Food as an avenue of increased sales
      and
      profitability.  Only the most progressive convenience store operations
      have automated systems to help store managers, leaving the majority of the
      operators without any technology to ease their administrative and operations
      burdens.




2


**Supplier**




As
      stated
      above, Supermarkets and Convenience Stores are increasingly dependent upon
      perishable departments for increased profitability.  Suppliers are
      increasingly being pressured by retailers to provide economic incentives or
      assistance.  Park City Group has developed Supply Chain Profit link to
      enable suppliers to provide that assistance.




**Specialty
      Retail**




Specialty
      Retailers are faced with a shrinking labor force and strong competition for
      qualified managers and staff.  Managers are time-constrained due to
      increased labor and inventory demands, margins are increasingly tight, due
      to
      higher labor and lease expenses, and customer satisfaction demands are higher
      than ever before.  Park City Group has developed a range of
      applications that enable managers in specialty retail to improve their labor
      scheduling efficiency and reduce their total paperwork and administrative
      workload.




**Fresh
      Market Manager**





Addressing
      the inventory issues that plague today’s retailers, Fresh Market Manager is a
      suite of software product applications designed to help manage perishable food
      departments including bakery, deli, seafood, produce, meat, home meal
      replacement, dairy, frozen food, and floral. Although the supermarket and
      convenience store industries have invested substantial sums on Point-of-Sale,
      scanning systems, etc., those systems are, almost without exception, limited
      to
      proving price look-up functions rather than decision support
      functions.  These industries are a classic representation of “data
      rich” and “information poor”.  Park City Group is capitalizing on that
      environment to bring together information from disparate legacy applications
      and
      databases to provide an end-to-end integrated merchandising, production
      planning, demand forecasting and perpetual inventory system to address the
      industry’s perishable department needs.





Fresh
      Market Manager helps identify true cost of goods and provides accurate and
      actionable profitability data on a corporate, regional, store-by-store, and/or
      item-by-item basis.  Fresh Market Manager also can produce
      hour-by-hour forecasts, production plans, perpetual inventory, and
      places/receives orders.  Fresh Market Manager automates the majority
      of the planning, forecasting, ordering, and administrative functions associated
      with fresh merchandise or products.





**ActionManagerTM**





The
      second most important cost element typically facing today’s retailers is
      labor.  ActionManagerTM addresses labor needs by providing a suite of
      solutions that forecast labor demand, schedules staff resources, and provides
      store managers with the necessary tools to keep labor costs under control while
      improving customer service, satisfaction and sales.  Daily availability of
      this information can help a retailer to address issues more
      quickly.





ActionManager
      applications provide an automated method for managers to plan, schedule, and
      administer many of the administrative tasks including new hire paperwork and
      time and attendance.  In addition to automating most administrative
      processes, ActionManager provides the local manager with a “dashboard” view of
      the business.  ActionManager also has extensive reporting capabilities
      for corporate, field, and store-level management to enable improved decision
      support.





**Supply
      Chain Profit Link**





Supply
      Chain Profit Link (SCPL) allows suppliers an opportunity to work with their
      retail partners on optimizing profits, while reducing stock outs and minimizing
      shrink (or waste).  SCPL is capable of providing daily or weekly
      store-by-store item level information to a supplier to facilitate decision
      support.  SCPL allows suppliers opportunities to customize assortment
      plans, promotions, and pricing strategies on a store-by-store
      level.





**Professional
      Services**





Park
      City
      Group’s Professional Services offering include project management, technical
      implementation, and end-user training.  In addition, Park City Group
      offers a variety of traditional consulting services configured to meet specific
      customer needs.  Beyond these traditional services, Park City Group
      provides consulting, including merchandising and store operations, that is
      focused on the primary objective of helping customers to improve their
      profitability through the full use of the Company’s products.





3


**Sales
      and
      Marketing**





Through
      a focused and dedicated sales
      effort designed to address the requirements of each of its business, Park City
      Group believes its sales force is positioned to understand its customers’
businesses, trends in the marketplace, competitive products and opportunities
      for new product development. The Company’s deep industry knowledge enables it to
      take a consultative approach in working with its prospects and
      customers.  Park City Group’s sales personnel focus on selling its
      technology solutions to major customers, both domestically and
      internationally.





To
      date, Park City Group’s primary
      marketing objectives have been to increase awareness of Park City Group’s
      technology solutions and generate sales leads. To this end, Park City Group
      attends industry trade shows, conducts direct marketing programs, publishes
      industry trade articles and white papers, participates in interviews, and
      selectively advertises in industry publications.





**Customers**





Our
      customers include some of the most notable names in retailing,
      including:  Schnuck’s, Pathmark, Tesco-Lotus, Circle K Midwest, Home
      Depot, Wawa, Sheetz, Williams-Sonoma, and others.





**Competition**





The
      market for Park City Group’s
      products and services is very competitive. Park City Group believes the
      principal competitive factors include product quality, reliability, performance,
      price, vendor and product reputation, financial stability, features and
      functions, ease of use, quality of support and degree of integration effort
      required with other systems.  While our competitors are often larger
      companies with larger sales forces and marketing budgets, we believe that our
      deep industry knowledge and the breadth and depth of our offerings give us
      a
      competitive advantage.  Park City Group’s ability to continually
      improve its products, processes and services, as well as its ability to develop
      new products, enables the Company to meet evolving customer
      requirements.Park
      City Group competes with companies
      such as Workbrain, Radient Systems, Kronos, Tomax, Capgemini, Electronic Data
      Systems, and others.





**Product
      Development**




The
      products sold by the Company are
      subject to rapid and continual technological change. Products available from
      the
      Company, as well as from its competitors, have increasingly offered a wider
      range of features and capabilities. The Company believes that in order to
      compete effectively in its selected markets, it must provide compatible systems
      incorporating new technologies at competitive prices. In order to achieve this,
      the Company has made a substantial ongoing commitment to research and
      development. .




Park
      City
      Group’s product development strategy is focused on creating common technology
      elements that can be leveraged in applications across its core markets. The
      Company’s software architecture is based on open platforms and is modular,
      thereby allowing it to be phased into a customer’s operations. In order to
      remain competitive, Park City Group is currently designing, coding and testing
      a
      number of new products and developing expanded functionality of its currentproducts.





**Patents
      and Proprietary Rights**





The
      Company owns and controls 7 U.S. patents, 8 U.S. trademarks and 37 U.S.
      copyrights relating to its software technology that are approved and issued.
      In
      addition, the Company has 3 patents currently pending.  The Company
      has 14 international patents and patent applications pending.  The
      patents referred to above are continuously reviewed and renewed as their
      expiration dates come due.





Company
      policy is to seek patent protection for all developments, inventions and
      improvements that are patentable and have potential value to the Company and
      to
      protect its trade secrets other confidential and proprietary
      information.  The Company intends to vigorously defend its
      intellectual property rights to the extent its resources permit.





Future
      success may depend upon the strength of the Company’s intellectual
      property.  Although management believes that the scope
      of  patents/patent applications are sufficiently broad to prevent
      competitors from introducing devices of similar novelty and design to compete
      with the Company’s current products and that such patents and patent
      applications are or will be valid and enforceable, there are no assurances
      that
      if such patents are challenged, this belief will prove correct.  The
      Company has, however, successfully defended one of these patents in two separate
      instances and as such, has some level of confidence in the Company’s ability to
      maintain its patents.  In addition, patent applications filed in
      foreign countries and patents granted in such countries are subject to laws,
      rules and procedures, which differ from those in the U.S.  Patent
      protection in such countries may be different from patent protection provided
      by
      U.S. Laws and may not be as favorable.





4


The
      Company is not aware of any patent infringement claims against it; however,
      there are no assurances that litigation to enforce patents issued to the
      Company, to protect proprietary information, or to defend against the Company’s
      alleged infringement of the rights of others will not occur.  Should
      any such litigation occur, the Company may incur significant litigation costs,
      the Company’s resources may be diverted from other planned activities, and
      result in a materially adverse effect on the Company’s operations and financial
      condition.





The
      Company relies on a combination of patent, copyright, trademark, and other
      laws
      to protect its proprietary rights.  There are no assurances that the
      Company’s attempted compliance with patent, copyrights, trademark or other laws
      will adequately protect its proprietary rights or that there will be adequate
      remedies for any breach of our trade secrets.  In addition, should the
      Company fail to adequately comply with laws pertaining to its proprietary
      protection, the Company may incur additional regulatory compliance
      costs.





**Government
      Regulation and Approval**





Like
      all
      businesses, the Company is subject to numerous federal, state and local laws
      and
      regulations, including regulations relating to patent, copyright, and trademark
      law matters.





**Cost
      of Compliance with Environmental Laws**





The
      Company currently has no costs associated with compliance with environmental
      regulations, and does not anticipate any future costs associated with
      environmental compliance; however, there can be no assurance that it will not
      incur such costs in the future.





**Research
      and Development**





Total
      research and development expenditures were $1,717,793 and $1,451,069 for the
      years ended June 30, 2007 and 2006, respectively; an 18% increase. This
      comparative increase is attributable to the completion of capitalized
      development projects in the second half of fiscal year 2007.  The
      Company capitalized $419,393 in labor and overhead costs for the Fiscal Year
      Ended June 30, 2007 compared to $613,717 for June 30, 2006. The Company is
      currently working on one significant enhancement that may be available for
      sale
      as early as the later part of FYE 2008.





**Reports
      to Security Holders**





The
      Company is subject to the informational requirements of the Securities Exchange
      Act of 1934.  Accordingly, it files annual, quarterly and other
      reports and information with the Securities and Exchange
      Commission.  You may read and copy these reports and other information
      at the Securities and Exchange Commission's public reference rooms in
      Washington, D.C. and Chicago, Illinois.  The Company’s filings are
      also available to the public from commercial document retrieval services and
      the
      Internet world wide website maintained by the Securities and Exchange Commission
      at www.sec.gov.





**Employees**





As
      of
      September 28, 2007, the Company had 32 employees, including 9 software
      developers and programmers, 9 sales, marketing and account management employees,
      7 software service and support employees and 7 accounting and administrative
      employees.  During 2007, the Company contracted with 5 programmers and
      two Business Analysts in India.  The Company is planning to expand
      their Indian workforce to support sales and implementations in Asia and to
      provide additional programming resources.  All of these employees and
      contractors work for the Company on a full time basis.  The employees
      are not represented by any labor union.





**Item
      2.  Description of Properties**




The
      Company’s principal place of business operations is located at 3160 Pinebrook
      Road, Park City, Utah 84098.  The Company leases approximately 10,000
      square feet at this home office location, consisting primarily of office space,
      conference rooms and storage areas.  The telephone number is (435)
      645-2000.  The website address is
http://www.parkcitygroup.com.





**Item
      3.  Legal Proceedings**




The
      Company filed a lawsuit against Workbrain Corporation titled Park City
      Group, Inc. vs. Workbrain Corporation Case No. 2:06 cv 289 on April 2006 which
      is pending in the Federal District Court for the District of Utah.  The
      Company claims that Workbrain Corporation is infringing upon its patent #
      5,111,391.  Based on evaluation from the Company’s outside counsel, and
      findings as a result of exchange of discovery, on August 13, 2007, the Company
      filed its preliminary infringement contention with United States District Court
      of Utah Central Division.  Damages sought by the Company are to be
      determined at trial. The Company will vigorously pursue this
      matter.





5


On
      June
      29, 2007, the Company was served with a complaint from two previous employees
      titled James D. Horton and Aaron Prevo v Park City Group, Inc. and Randy Fields,
      Individually Case No. 070700333, which has been filed in the Second Judicial
      District Court, Davis County, Utah. The plaintiffs’ complaint alleges that
      certain provisions of their employment agreements were not honored including
      breach of employer obligations, fraud, unjust enrichment, and breach of
      contract.  The plaintiffs are seeking combined damages for alleged
      unpaid compensation and punitive damages of $520,650 and $2,603,250,
      respectively. The Company denies all allegations in the complaint and will
      vigorously defend this matter.





**Item
      4.  Submission of Matters to a Vote of Security
      Holders**





None























**(REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK)**













































































6


**PART
      II**


**Item
      5.  Market for Common Equity and Related Stockholder
      Matters**





**Dividend
      Policy**





To
      date,
      the Company has not paid dividends on common stock. The Series A Convertible
      Preferred Stock issued in the June 2007 offering has the right to a 5%
      cumulative dividend. Prior to June 1, 2010, preferred dividends can be paid
      in
      cash or Series A Convertible Preferred Stock at the option of the
      Company.  After June 1, 2010, the holders of the Series A Convertible
      Preferred Stock may elect to have future dividend paid in cash in the event
      that
      during any sixty (60) trading day period commencing on or after June 1, 2010,
      the average closing price shall be less than or equal to the Series A
      Convertible Preferred stock conversion price.  Our present policy is
      to retain future earnings (if any) for use in our operations and the expansion
      of our business.





**Share
      Price History**





Common
      stock (the “Common Stock”) is traded in the over-the-counter market in what is
      commonly referred to as the “Electronic” or “OTC Bulletin Board” or the “OTCBB”
under the trading symbol “PCYG.” The following table sets forth the high and low
      bid information of the Common Stock’s closing price for the periods
      indicated.  The price information contained in the table was obtained
      from internet sources considered reliable.  Note that such
      over-the-counter market quotations reflect inter-dealer prices, without retail
      mark-up, markdown or commission and the quotations may not necessarily represent
      actual transactions in the Common Stock.  NOTE: On the 11th day of
      August
      2006, the company effected a 1 for 50 reverse stock split.  All
      trading price information set forth below gives effect to such reverse stock
      split.





Fiscal
                Year 2006
            
            Low
            
            
            HighSeptember
                30, 2005
            
            $
            1.50
            
            
            $
            3.00December
                31, 2005
            
            $
            2.00
            
            
            $
            5.50March
                31, 2006
            
            $
            2.00
            
            
            $
            4.00June
                30, 2006
            
            $
            2.00
            
            
            $
            5.50Fiscal
                Year 2007September
                30, 2006
            
            $
            2.10
            
            
            $
            5.00December
                31, 2006
            
            $
            2.30
            
            
            $
            3.50March
                31, 2007
            
            $
            1.75
            
            
            $
            3.25June
                30, 2007
            
            $
            2.15
            
            
            $
            3.39





**Holders
      of Record**





At
      September 28, 2007 there were 662 holders of record of Common Stock and shares
      issued and outstanding of 8,960,703.  The number of holders of record
      and shares issued and outstanding was calculated by reference to the stock
      transfer agent's books.





**Purchases
      of Equity Securities by the Small Business Issuer and Affiliated
      Purchasers**





None





**Equity
      Compensation Plan Information**


**Equity
        Compensation Plan Information**




**Plan
                  category**
              
              **Number
                  of securities to be issued upon exercise of outstanding options,
                  warrants
                  and rights**
                **(a)**
              
              **Weighted-average
                  exercise price of outstanding options, warrants and
                  rights**
                **(b)**
              
              **Number
                  of securities remaining available for future issuance under equity
                  compensation plans (excluding securities reflected in column
                  (a))**
                **(c)**Equity
                  compensation plans approved by security holders
              
              0
              
              0
              
              0Equity
                  compensation plans not approved by security holders
              
              125,876
              
              $2.56
              
              34,124**Total**
              
              125,876
              
              $2.56
              
              34,124


7


The
      Company has several different Equity Compensation Plans in effect at this
      time.   These include the following


·
            In
                August 2003 the Company authorized 40,000 options for distribution
                to the
                employees.  These options had a strike price of
                $2.50


·
            In
                August 2003 the Company authorized 40,000 options for distribution
                to the
                senior management.  These options had a strike price of
                $1.50


·
            In
                September of 2005 the Company authorized to pay Senior Management
                3
                options for every share purchased at $3.50 for one
                year.  Starting October of 2006 Senior Management will get 2
                options for every share purchased from the Company at market price
                or
                $3.50 which ever is higher.





**Issuance
      of Securities**





We
      issued
      shares of our common and preferred stock in unregistered transactions during
      2007. All of the shares of common and preferred stock issued were issued in
      non
      registered transactions in reliance on Section 4(2) of the Securities Act of
      1933, as amended (the “Securities Act”). We report shares issued on an annual
      basis. The shares of common and preferred stock issued subsequent to June 30,
      2006 were issued as follows:





·
            In
                March 2007, we issued 6,344 shares of common stock to board members
                in
                lieu of cash compensation of
                $15,000.





·
            In
                March 2007, we issued 7,142 shares of common stock to members of
                management per employment agreements.  At issuance these shares
                had a market value of $17,355.





·
            In
                March 2007, we issued 4,224 shares of common stock to three employees
                as
                bonuses for extra efforts put forth facilitating the relocation of
                the
                Company’s corporate headquarters, these shares had a market value of
                $8,744 at issuance.





·
            In
                May 2007, we issued 1,905 shares of common stock to three employees
                as
                bonuses for extra efforts; these shares had a market value of $6,000
                at
                issuance.





·
            In
                June 2007, we granted warrants to purchase 194,667 shares of common
                stock
                to employees of Taglich Brothers, Inc. As part of a commission agreement
                for acting as Placement Agent for the June 2007 placement.  The
                warrants have an exercise price of $3.30 and expire on June 22,
                2012.





·
            In
                June 2007, we issued 584,000 shares of Series A Convertible Preferred
                Stock ($10.00) to accredited investors in connection with a Placement
                Agreement.  These investors also received warrants to purchase
                417,137 shares of common stock.  The warrants have an exercise
                price of $4.00 and expire on May 31,
                2011.





·
            In
                June 2007, we issued 10,322 shares of common stock to board members
                in
                lieu of cash compensation of
                $25,000.





·
            In
                June 2007, we approved the issuance of 37,000 shares of common stock
                to Robert Hermanns in a non-public offering in exchange for cash
                of
                $102,120.  Mr. Hermanns was also granted an option to purchase
                an additional 74,000 shares of common stock.  The option has an
                exercise price of $2.76 and expires on June 29,
                2010.










8


**Item
      6.  Management's Discussion and Analysis of Financial Condition and
      Results of Operation**


**for
      the Years Ended June 30, 2007 and June 30, 2006**





The
      following discussion and analysis provides information that management believes
      is relevant to an assessment and understanding of the consolidated results
      of
      operations and financial condition.  The terms “Company”, “we”, “our”
or “us” are used in this discussion to refer to Park City Group,
      Inc.  (formerly Fields Technologies, Inc.)  along with Park
      City Group, Inc.'s wholly owned subsidiary, Fresh Market Manager, LLC, on a
      consolidated basis, except where the context clearly indicates
      otherwise.





**Overview**





The
      principal business is the design, development, marketing and support of
      proprietary software products along with ongoing operational consulting
      practice.  These software products are designed to be used in retail
      and grocery businesses having multiple locations by assisting individual store
      locations and corporate management with managing daily business operations
      and
      communicating results of those operations in a timely manner.





Through
      June 30, 2007 the Company has accumulated aggregate consolidated losses totaling
      $21,783,395 which includes a net loss of $3,011,627 and net income of $1,393,596
      for the years ended June 30, 2007, and 2006, respectively.





**Management’s
      Discussion and Analysis**





**Years
      Ended June 30, 2007 and 2006**





During
      the year ended June 30, 2007, the Company had total revenues of $2,592,166
      compared to $7,085,125 in 2006, a 63% decrease.





License
      fees were $525,503 and $3,626,821 for 2007 and 2006, respectively, an 86%
      decrease.  This $3,101,318 decrease was primarily attributable to a
      $3,000,000 software license sale in the quarter ended September 30, 2005 that
      did not occur in the same period then ended in 2006.  The Company has
      historically realized the majority of its annual revenues through non-recurring
      software license fees. For the year ended, June 30, 2007 and 2006, 20% and
      51%
      of total revenue were based on one-time non-recurring license revenue,
      respectively.  In March 2007, the Company substantially changed its
      business initiative from a licensed based approach to a monthly subscription
      based approach. Management believes that offering its entire suite of products
      and services in discrete more affordable units on a subscription basis will
      reduce the proportion of one-time license sales as well as significantly shorten
      its time to market and sales cycles. Management is in the process of
      reorganizing all of its products (Fresh Market Manager, ActionManager, and
      Supply Chain Profit Link) on a subscription based offering to its
      customers.





Maintenance
      and support revenues decreased by 33% from $2,271,997 in 2006 to $1,513,016
      for
      2007.  The $758,981 decrease is due to the following: 1) $259,000 of
      the decrease was the result of Action Manager maintenance customers who did
      not
      require further support services at the store level; and 2) the large one-time,
      non-recurring license client in Fiscal Year 2006 did not require extending
      its
      annual maintenance and professional services contract in the amount of
      approximately $540,000.





Subscription
      revenues were $89,251 and $182,083, for 2007 and 2006 respectively; a decrease
      of 51%.  This $92,832 decrease was the result of the loss of two prior
      year customers, and partially offset by increases in new customers transitioning
      from a license based pricing approach toward an annual subscription to its
      products and services. The Company anticipates a greater increase in its
      customers participating on a subscription basis in FYE 2008.





Professional
      services revenue decreased by 54% to $464,396 for 2007, compared to $1,004,224
      for 2006.  This $539,828 decrease is due to the completion of two
      large projects. One that was begun in the quarter ended September 30, 2005,
      and
      one that was begun in fiscal year 2005 and completed in the quarter ended
      September 30, 2007. This was partially offset by an increase in services
      provided to a large retail customer..





Research
      and development expenditures were $1,717,793 and $1,451,069 for the years ended
      June 30, 2007 and 2006, respectively; an 18% increase. This comparative increase
      of $266,724 is attributable to the completion of 3 capitalized projects in
      Fiscal Year 2007 that have reduced the specific costs capitalized in accordance
      with SFAS 86 *“Accounting for the Costs of Computer Software to Be Sold,
      Leased, or Otherwise Marketed.”* The comparative reduction of costs
      capitalized for research and development was approximately $260,000.
      Additionally, the Company continues to expand the Company’s development
      workforce in India that began in April 2006.





Sales
      and
      marketing expenses were $1,508,276 and $1,410,406 for 2007 and 2006,
      respectively, a 7% increase over the previous year.  In conjunction
      with the release of a significant enhancement (Service Release 5 “SR5”) for its
      FMM suite of products in 3rd Quarter
      of 2007
      and the subscription offering of its SCPL tool, the Company has proportionally
      increased its sales and marketing staff. As a result, the Company has deployed
      2
      additional sales staff and 1 outside consultant to target its current customer
      base and prospects to expand the market awareness of its subscription based
      offering.





9


General
      and administrative expenses were $2,002,552 and $1,585,364 for 2007 and 2006,
      respectively, a 26% increase. This $417,188 increase is attributable to an
      increase of $250,000 in legal fees associated with an ongoing patent lawsuit
      and
      compensation expenses of approximately $150,000 relating to adoption of SFAS
      No.
      123R (revised 2004) “*Share-Based Payments.*” The additional expense is a
      result of staff additions in accounting, general administration, and partially
      offset by a $52,000 recovery of a bad debt.





Depreciation
      and Amortization expenses were $368,636 and $550,161 for 2007 and 2006,
      respectively, a decrease of 33%.  This decrease of $181,525 is
      attributable to the following; 1) property plant and equipment that was fully
      depreciated during the prior year ending June 30, 2006 2.) a reduction in
      capitalized software costs for significant enhancements and one new product
      that
      was released.  3) a decrease of approximately $127,000 in debt
      discounts that were fully amortized in prior year due to retirement and debt
      restructuring in March 2006.





Interest
      expense was $114,650 and $660,016 for 2007 and 2006, respectively, an 83%
      decrease.  This $545,366 decrease is attributable to the retirement of
      a note payable with proceeds from operations, the conversion of a note payable
      with Riverview Financial into common stock, and the refinancing of higher
      interest rate debt with a note payable from a bank. See Notes 8, Notes 12,
      and
      16 to the financial statements.





**Financial
      Position, Liquidity and Capital Resources**





Net
      cash
      used in operations for the year ended June 30, 2007, was $2,948,063 compared
      to
      an operating cash-flow surplus of $725,134 for the year ended June 30, 2006.
      The
      comparative reduction in net cash provided by operations is the result of a
      $3.0
      million customer contract that was received in 2006 including approximately
      $600,000 in related maintenance and consulting fees that did not occur in 2007.
      The 2007 decrease in cash provided by operations is also a result of the Company
      transitioning from its historical reliance on non-recurring license sales toward
      a recurring subscription model.





Cash,
      cash equivalents and restricted cash was $5,213,424 and $3,571,060 at June
      30,
      2007, and June 30, 2006, respectively.  This net increase of
      $1,696,364 was the direct result of the Company’s issuance of 584,000 shares of
      its Series A Convertible Preferred Stock in June of 2007. For this placement,
      the Company received $5,278,788 net of offering costs and cash paid for
      cancellation of partial shares associated with its reverse stock split that
      occurred in August 2006. For the year then ended, June 30, 2006 the company
      utilized $2,373,268 in order to retire notes payable and capital lease
      obligations. This was partially offset by the $3.0 million the Company received
      from a large license customer.





Net
      cash
      flows used in investing activities was $2,538,650 and $586,797 for years ending
      June 30, 2007 and 2006, respectively.  This $1,951,853 comparable
      increase in cash investment was the result of the Company securing a $1.94
      million certificate of deposit in order to collateralize a note payable held
      by
      its bank. The restricted cash was utilized to eliminate its guarantor Riverview
      Financial. The remaining investment activities were a result of an increase
      in
      the purchase of computer equipment required of its SCPL tool, as well as
      furniture and other equipment associated with the Company’s relocation of its
      corporate facilities in January of 2007.This was offset by the reduction in
      capitalized development cost associated with the release of several significant
      enhancements to the Company’s Fresh Market Manager suite of products in
      2007.





Net
      cash
      provided by financing activities totaled $5,243,077 in 2007 compared to
      $3,169,053 for the year ended June 30, 2006. As previously stated, the Company
      issued 584,000 shares of its Series A Convertible Preferred Stock in June of
      2007. See Note 15 for the terms and conditions of the Series A Convertible
      Preferred Stock.  In 2006, the Company utilized proceeds from a common
      stock placement in order to reduce its outstanding line of credit in the amount
      of $716,743 and to retire a note payable and capital lease obligations in the
      amount of $2,373,268.





Current
      assets at June 30, 2007 totaled $6,350,648, an increase of $2,319,070 over
      June
      30, 2006. The Company had $5,213,424 of cash, cash equivalents and restricted
      cash as of June 30, 2007. Restricted cash of $1,940,000 collateralizes a note
      payable with its bank.  The collateralized note bears the same
      interest as the interest received on its restricted cash. For the year ended,
      June 30, 2006 the Company had $3,517,060 in cash and cash
      equivalents.





Current
      liabilities totaled $3,177,296 and $1,497,282 for the years then ended June
      30,
      2007 and 2006, respectively.  The $1,680,014 comparative increase in
      current liabilities was the result of the Company obtaining a note payable
      with
      its bank and eliminating Riverview Financial as guarantor on the note. The
      Company also recognized a $276,076 increase in accounts payable as a result
      of
      an increase in legal fees associated with its patent defense and capital
      expenditures for equipment associated with the relocation of its corporate
      headquarters.





10


Working
      capital at June 30, 2007 was $3,173,352 compared to $2,534,296 at June 30,
      2006.  The increase in working capital is principally a result of the
      Company’s issuance of 584,000 shares of its Series A Convertible Preferred Stock
      that occurred in June 2007 which is offset by a $276,076 increase in accounts
      payable.





Historically,
      the Company has financed its operations through operating revenues, loans from
      directors, officers and stockholders, loans from the CEO and majority
      shareholder, and private placements of equity securities.  Since 2006,
      the Company has converted all loans and notes payable from its officers and
      directors to stock.  In 2007, due to its increase in financial
      position, the Company has been able to eliminate Riverview Financial Corp as
      its
      guarantor and maintains its own collateralization of the note payable for $1.940
      million. The Company believes that anticipated revenue growth in combination
      with strict cost control will allow the Company to meet its minimum operating
      cash requirements for the next 12 months.





The
      financial statements do not reflect any adjustments should the Company’s
      operations not be achieved. Although the Company anticipates that it will meet
      its working capital requirements, there can be no assurances that the Company
      will be able to meet its working capital requirements.  Should the
      Company desire to raise additional equity or debt financing, there are no
      assurances that the Company could do so on acceptable terms.





**Inflation**





The
      impact of inflation may cause retailers to slow spending in the technology
      area,
      which could have an impact on company sales.





**Risk
      Factors**





The
      Company is subject to certain other risk factors due to the organization and
      structure of the business, the industry in which it competes and the nature
      of
      its operations.  These risk factors include the
      following:





**Risks
      Related To the Company**





**The
      Company has incurred losses in the past and there can be no assurance that
      the
      Company will operate continually or consistently at a profit in the future.
      Resulting losses could cause a reduction in operations and could have a
      detrimental effect on the long-term capital appreciation of the Company’s
      stock.**





The
      Company’s marketing strategy emphasizes sales activities for the Fresh Market
      Manager, ActionManagerTM, and Supply Chain Profit Link applications to
      Supermarkets, Convenience Stores, Specialty Retail, Financial Services, and
      Food
      Manufacturers.  If this marketing strategy fails, revenues and
      operations will be negatively affected.  A reduction in revenues will
      result in increases in operational losses.





For
      the
      fiscal years ended June 30, 2007 and June 30, 2006, the Company had a net loss
      of $3,011,627 and net income of $1,393,596 respectively. There can be no
      assurance that the Company will reliably or consistently operate profitably
      during future fiscal years. If the Company does not operate profitably in the
      future the Company’s current cash resources will be used to fund the Company’s
      operating losses.  If this were to continue, in order to continue with
      the Company’s operations, the Company would need to raise additional
      capital.   Continued losses would have an adverse effect on the
      long term value of the Company’s common stock and an investment in the
      Company.  The Company cannot give any assurance that the Company will
      ever generate significant revenue or have sustainable profits.





**The
      Company liquidity and capital requirements will be difficult to predict, which
      may adversely affect the Company’s cash position in the
      future.**





In
      June
      of 2007, the Company completed the sale of shares of its Series A Convertible
      Preferred Stock from which it received gross offering proceeds of
      $5,840,000.   The Company anticipates that it will have adequate
      cash resources to fund its operations for at least the next 12
      months.  Thereafter, its liquidity and capital requirements will
      depend upon numerous other factors, including the following:





·
            The
                extent to which the Company’s products and services gain market
                acceptance;




·
            The
                progress and scope of product
                evaluations;




·
            The
                timing and costs of acquisitions and product and services
                introductions;




·
            The
                extent of the Company’s ongoing research and development programs;
                and




·
            The
                costs of developing marketing and distribution
                capabilities.





11


If
      in the
      future, the Company is required to seek additional financing in order to fund
      its operations and carry out its business plan, there can be no assurance that
      such financing will be available on acceptable terms, or at all, and there
      can
      be no assurance that any such arrangement, if required or otherwise sought,
      would be available on terms deemed to be commercially acceptable and in the
      Company’s best interests.




**Operating
      results may fluctuate, which makes it difficult to predict future
      performance.**





Management
      expects a portion of the Company’s revenue stream to come from license sales,
      maintenance and services charged to new customers, which will fluctuate in
      amounts because software sales to retailers are difficult to
      predict.  In addition, the Company may potentially experience
      significant fluctuations in future operating results caused by a variety of
      factors, many of which are outside  of its control,
      including:





·
            Demand
                for and market acceptance of new
                products;





·
            Introduction
                or enhancement of products and services by the Company or its
                competitors;





·
            Capacity
                utilization;





·
            Technical
                difficulties, system downtime;





·
            Fluctuations
                in data communications and telecommunications
                costs;





·
            Maintenance
                subscriber retention;





·
            The
                timing and magnitude of capital expenditures and
                requirements;





·
            Costs
                relating to the expansion or upgrading of operations, facilities,
                and
                infrastructure;





·
            Changes
                in pricing policies and those of
                competitors;





·
            Composition
                and duration of product mix including license sales, consulting fees,
                and
                the timing of software rollouts;





·
            Changes
                in regulatory laws and policies,
                and;





·
            General
                economic conditions, particularly those related to the information
                technology industry.





Because
      of the foregoing factors, future operating results may fluctuate.  As
      a result of such fluctuations, it will be difficult to predict operating
      results.  Period-to-period comparisons of operating results are not
      necessarily meaningful and should not be relied upon as an indicator of future
      performance.  In addition, a relatively large portion of the Company’s
      expenses will be fixed in the short-term, particularly with respect to
      facilities and personnel.  Therefore, future operating results will be
      particularly sensitive to fluctuations in revenues because of these and other
      short-term fixed costs.





**The
      Company will need to effectively manage its growth in order to achieve and
      sustain profitability.  The Company’s failure to manage growth
      effectively could reduce its sales growth and result in continued net
      losses.**





To
      achieve continual and consistent profitable operations on a fiscal year on-going
      basis, the Company must have significant growth in its revenues from the sale
      of
      its products and services.  If the Company is able to achieve
      significant growth in future sales and to expand the scope of the Company’s
      operations, and its management, financial, and other capabilities and existing
      procedures and controls could be strained.  The Company cannot be
      certain that it’s existing or any additional capabilities, procedures, systems,
      or controls will be adequate to support the Company’s operations.  The
      Company may not be able to design, implement, or improve its capabilities,
      procedures, systems, or controls in a timely and cost-effective
      manner.  Failure to implement, improve and expand the Company’s
      capabilities, procedures, systems, or controls in an efficient and timely manner
      could reduce the Company’s sales growth and result in a reduction of
      profitability or increase of net losses.





**The
      Company’s officers and directors have significant control over it, which may
      lead to conflicts with other stockholders over corporate
      governance.**





12


The
      Company’s officers and directors, other than the Chief Executive Officer,
      control approximately 7.79% of the Company’s common stock.  The
      Company’s Chief Executive Officer, Randall K. Fields, individually, controls
      47.36% of the Company’s common stock.





Consequently,
      Mr. Fields, individually, and the Company’s officers and directors, as
      stockholders acting together, will be able to significantly influence all
      matters requiring approval by the Company’s stockholders, including the election
      of directors and significant corporate transactions, such as mergers or other
      business combination transactions.





**The
      Company’s corporate charter contains authorized, unissued “blank check”
preferred stock that can be issued without stockholder approval with the effect
      of diluting then current stockholder interests.**





The
      Company’s certificate of incorporation currently authorizes the issuance of up
      to 30,000,000 shares of “blank check” preferred stock with designations, rights,
      and preferences as may be determined from time to time by the Company’s board of
      directors.  In June 2007, the Company completed the sale of 584,000
      shares of its Series A Convertible Preferred Stock.  The Company’s
      board of directors is empowered, without stockholder approval, to issue one
      or
      more additional series of preferred stock with dividend, liquidation,
      conversion, voting, or other rights that could dilute the interest of, or impair
      the voting power of, the Company’s common stockholders.  The issuance
      of an additional series of preferred stock could be used as a method of
      discouraging, delaying, or preventing a change in control.





**Because
      the Company has never paid dividends on its Common Stock, you should exercise
      caution before making an investment in the Company.**




The
      Company has never paid dividends on its common stock and does not anticipate the
      declaration of any dividends pertaining to its common stock in the foreseeable
      future. The Company intends to retain earnings, if any, to finance the
      development and expansion of the Company’s business.  The Company’s
      Board of Directors will determine future dividend policy at their sole
      discretion and future dividends will be contingent upon future earnings, if
      any,
      obligations of the stock issued, The Company’s financial condition, capital
      requirements, general business conditions and other factors.  Future
      dividends may also be affected by covenants contained in loan or other financing
      documents, which may be executed by the Company in the
      future.  Therefore, there can be no assurance that dividends will ever
      be paid on its common stock.




**The
      Company’s business is dependent upon the continued services of the Company’s
      founder and Chief Executive Officer, Randall K. Fields; should the Company
      lose
      the services of Mr. Fields, the Company’s operations will be negatively
      impacted.**




The
      Company’s business is dependent upon the expertise of its founder and Chief
      Executive Officer, Randall K. Fields.  Mr. Fields is essential to the
      Company’s operations.  Accordingly, an investor must rely on Mr.
      Fields’ management decisions that will continue to control the Company’s
      business affairs after the offering.  The Company currently maintains
      key man insurance on Mr. Fields’ life in the amount of $10,000,000; however,
      that coverage would be inadequate to compensate for the loss of his services.
      The loss of the services of Mr. Fields would have a materially adverse effect
      upon the Company’s business.




**If
      the Company is unable to attract and retain qualified personnel, the Company
      may
      be unable to develop, retain or expand the staff necessary to support its
      operational business needs.**




The
      Company’s current and future success depends on its ability to identify,
      attract, hire, train, retain and motivate various employees, including skilled
      software development, technical, managerial, sales, marketing and customer
      service personnel. Competition for such employees is intense and the Company
      may
      be unable to attract or retain such professionals. If the Company fails to
      attract and retain these professionals, the Company’s revenues and expansion
      plans may be negatively impacted.




**The
      Company’s officers and directors have limited liability and indemnification
      rights under the Company’s organizational documents, which may impact its
      results.**




The
      Company’s officers and directors are required to exercise good faith and high
      integrity in the management of the Company’s affairs.  The Company’s
      certificate of incorporation and bylaws, however, provide, that the officers
      and
      directors shall have no liability to the stockholders for losses sustained
      or
      liabilities incurred which arise from any transaction in their respective
      managerial capacities unless they violated their duty of loyalty, did not act
      in
      good faith, engaged in intentional misconduct or knowingly violated the law,
      approved an improper dividend or stock repurchase, or derived an improper
      benefit from the transaction. As a result, an investor may have a more limited
      right to action than he would have had if such a provision were not present.
      The
      Company’s certificate of incorporation and bylaws also require it to indemnify
      the Company’s officers and directors against any losses or liabilities they may
      incur as a result of the manner in which they operate the Company’s business or
      conduct the Company’s internal affairs, provided that the officers and directors
      reasonably believe such actions to be in, or not opposed to, the Company’s best
      interests, and their conduct does not constitute gross negligence, misconduct
      or
      breach of fiduciary obligations.






13


**Business
      Operations Risks**





**If
      the Company’s marketing strategy fails, its revenues and operations will be
      negatively affected.**




The
      Company plans to concentrate its future sales efforts towards marketing the
      Company’s applications and services. These applications and services are
      designed to be highly flexible so that they can work in multiple retail and
      supplier environments such as grocery stores, convenience stores, quick service
      restaurants, and route-based delivery environments.  There is no
      assurance that the public will accept the Company’s applications and services in
      proportion to the Company’s increased marketing of this product
      line.  The Company may face significant competition that may
      negatively affect demand for its applications and services, including the
      public’s preference for the Company’s competitors’ new product releases or
      updates over the Company’s releases or updates.  If the Company’s
      applications and services marketing strategy fails, the Company will need to
      refocus its marketing strategy to the Company’s other product offerings, which
      could lead to increased marketing costs, delayed revenue streams, and otherwise
      negatively affect the Company’s operations.





**Because
      the Company is changing the emphasis of the it’s sales activities from an annual
      license fee structure to a monthly fee structure, the Company’s revenues may be
      negatively affected.**





Historically,
      the Company offered applications and related maintenance contracts to new
      customers for a one-time, non-recurring up front license fee and provided an
      option for annually renewing their maintenance agreements.  Because
      the Company’s one-time licensing fee approach was subject to inconsistent and
      unpredictable revenues, the Company now offers prospective customers an option
      for monthly subscription based licensing of these products.  The
      Company’s customers may now choose to acquire a license to use the software on
      an Application Solution Provider basis (also referred to as ASP) resulting
      in
      monthly charges for use of the Company’s software products and maintenance
      fees.  The Company’s conversion from a strategy of one-time,
      non-recurring licensing based model to a monthly-based recurring fees based
      approach is subject to the following risks:





·
            The
                Company’s customers may prefer one-time fees rather than monthly
                fees;




·
            Because
                public awareness pertaining to the Company’s Application Solution Provider
                services will be delayed until the Company begins its marketing campaign
                to promote those services, the Company’s revenues may decrease over the
                short term; and




·
            There
                may be a threshold level (number of locations) at which the monthly
                based
                fee structure may not be economical to the customer, and a request
                to
                convert from monthly fees to annual fee could
                occur.





**The
      Company faces competition from competing and emerging technologies that may
      affect its profitability**.





The
      markets for the Company’s type of software products and that of its competitors
      are characterized by:







·
            Development
                of new software, software solutions, or enhancements that are subject
                to
                constant change;


·
            Rapidly
                evolving technological change; and


·
            Unanticipated
                changes in customer needs.


·
            Because
                these markets are subject to such rapid change, the life cycle of
                the
                Company’s products is difficult to predict; accordingly, the Company is
                subject to the following risks:




·
            Whether
                or how the Company will respond to technological changes in a timely
                or
                cost-effective manner;


·
            Whether
                the products or technologies developed by the Company’s competitors will
                render the Company’s products and services obsolete or shorten the life
                cycle of the Company’s products and services;
                and


·
            Whether
                the Company’s products and services will achieve market
                acceptance.





**If
      the Company is unable to adapt to constantly changing markets and to continue
      to
      develop new products and technologies to meet the Company’s customers’ needs,
      the Company’s revenues and profitability will be negatively
      affected.**





The
      Company’s future revenues are dependent upon the successful and timely
      development and licensing of new and enhanced versions of its products and
      potential product offerings suitable to the Company’s customer’s
      needs.  If the Company fails to successfully upgrade existing products
      and develop new products, and those new products do not achieve market
      acceptance, the Company’s revenues will be negatively impacted.





14


**The
      Company faces risks with attracting new first-time license clients from a
      limited global prospect pool.**





The
      Company’s software licensing is currently reliant upon a limited number of
      national and international prospect companies who require the Company’s unique
      product and services as a result of consolidation in the global number of
      retailers specifically in the grocery and retail industries.  As a
      consequence, future revenue may be significantly impacted if the Company is
      unable to attract new license customers from this limited prospect
      pool.





The
      Company expects that as a result of further industry consolidation and the
      limited customer pool from which the Company can attract new software license
      prospects, a small number of the Company’s new customers may continue to account
      for a substantial portion of current, non-recurring license revenues in future
      reporting periods.  In fiscal 2006, the Company’s top 5 new license
      customers accounted for 92% of total non-recurring license revenue and 70%
      of
      total annual revenue.  The remaining 30% of total annual revenue in
      fiscal 2006 included on-going recurring revenue attributable to product
      upgrades, consulting revenues, maintenance and support revenue.





**Historically,
      a substantial portion of the Company’s annual revenue has been derived from a
      one-time, non-recurring licensing fee for utilization of the Company’s patented
      software**





Historically,
      a large portion of the Company’s customers rely on the Company’s patented
      software for utilization during the normal course and scope of their business
      operations.  New customers are charged a license fee based on a
“blanket” license agreement fee for a particular software product or an initial
      license fee that is based on a store by store opening basis.  Although
      results vary from period to period, in fiscal 2006, non-recurring initial
      license fee revenue equaled $3,000,000 or 42% of total
      revenue.  Historically, over 94% of new, first-time license customers
      will not purchase products, license agreements, or services at the same
      financial level in future periods as they do in the first year of
      installation.  While the company is not substantially dependent on any
      one particular customer for providing a continued revenue stream, the Company
      is
      dependent on attracting new first-time license clients in order to meet the
      Company’s operating and capital cash flow needs since the initial fee
      represents, in most cases, a substantial portion of revenue.  If the
      Company cannot attract new first-time license customers, the Company’s remaining
      recurring revenue streams may not provide sufficient financial resources to
      support capital and operating needs.





The
      ability to attract new software license customers will depend on a variety
      of
      factors, including the relative success of marketing strategies and the
      performance, quality, features, and price of current and future
      products.  Accordingly, if the Company cannot attract new customer
      licensing accounts or existing customer needs for the Company’s product and
      services decrease, revenues and operating results will be negatively
      impacted.





**The
      Company faces risks associated with the loss of maintenance and other
      revenue**





The
      Company has experienced the loss of long term maintenance customers as a result
      of the reliability of its
      product. Some customers may
      not see the value in continuing to pay for maintenance that they do not need
      or
      use, and in some cases, customers have decided to replace the Company’s
      applications or maintain the system on their own.  The Company
      continues to focus on these maintenance clients by providing new functionality
      and applications to meet their business needs.  The Company also may
      lose some maintenance revenue due to consolidation of industries or customer
      operational difficulties that lead to their reduction of size.  In
      addition, future revenues will be negatively impacted if the Company fails
      to
      add new maintenance customers that will make additional purchases of the
      Company’s products and services.





**The
      Company faces risks associated with its new Supply Chain Profit Link
      product.**





Because
      this is a new product offering there are risks associated with it, such
      as:





§
            It
                may be difficult for the Company to predict the amount of service
                and
                technological resources that will be needed by new SCPL customers, and if the
                Company underestimates the
                necessary resources, the quality of its service
                will be
                negatively impacted thereby undermining the value of the product
                to the
                customer.





§
            The
                Company lacks the
                experience with this new product and its market acceptance to accurately
                predict if it will be a profitable
                product.





§
            Technological
                issues between the Company and the customer may be experienced in
                capturing data, and these technological issues may result in unforeseen
                conflicts or technological setbacks when implementing the software.
                This
                may result in material delays and even result in a termination of
                the
                engagement with the customer.





15


§
            The
                customer’s experience with SCPL, if negative, may prevent the Company from
                having an opportunity to sell additional products and services to
                that
                customer.





§
            If
                the customer does not use the product as the Company recommends and
                fails to implement any needed corrective action(s), it is unlikely
                that
                the customer will experience the business benefits from the software
                and
                may therefore be hesitant to continue the engagement as well as acquire
                any additional software products from the
                Company.





§
            Delays
                in proceeding with the implementation of the SCPL product by a new
                customer will negatively affect the Company’s cash flow
                and
                its ability to
                predict cash flow.





**The
      Company faces risks associated with proprietary protection of the Company’s
      software.**





The
      Company’s success depends on the Company’s ability to develop and protect
      existing and new proprietary technology and intellectual property
      rights.  The Company seeks to protect the Company’s software,
      documentation and other written materials primarily through a combination of
      patents, trademarks, and copyright laws, trade secret laws, confidentiality
      procedures and contractual provisions.  While the Company has
      attempted to safeguard and maintain the Company’s proprietary rights, there are
      no assurances that the Company will be successful in doing so.  The
      Company’s competitors may independently develop or patent technologies that are
      substantially equivalent or superior to the Company’s.





Despite
      the Company’s efforts to protect its proprietary rights, unauthorized parties
      may attempt to copy aspects of the Company’s products or obtain and use
      information that the Company regards as proprietary.  In some types of
      situations, the Company may rely in part on “shrink wrap” or “point and click”
licenses that are not signed by the end user and, therefore, may be
      unenforceable under the laws of certain jurisdictions.  Policing
      unauthorized use of the Company’s products is difficult.  While the
      Company is unable to determine the extent to which piracy of the Company’s
      software exists, software piracy can be expected to be a persistent problem,
      particularly in foreign countries where the laws may not protect proprietary
      rights as fully as the United States.  The Company can offer no
      assurance that the Company’s means of protecting its proprietary rights will be
      adequate or that the Company’s competitors will not reverse engineer or
      independently develop similar technology.





**The
      Company incorporates a number of third party software providers’ licensed
      technologies into its products, the loss of which could prevent sales of the
      Company’s products or increase the Company’s costs due to more costly substitute
      products.**





The
      Company licenses technologies from third party software providers, and such
      technologies are incorporated into the Company’s products.  The
      Company anticipates that it will continue to license technologies from third
      parties in the future.  The loss of these technologies or other
      third-party technologies could prevent sales of the Company’s products and
      increase the Company’s costs until substitute technologies, if available, are
      developed or identified, licensed and successfully integrated into the Company’s
      products.  Even if substitute technologies are available, there can be
      no guarantee that the Company will be able to license these technologies on
      commercially reasonable terms, if at all.





**The
      Company may discover software errors in its products that may result in a loss
      of revenues or injury to the Company’s reputation in the software
      industry.**





Non-conformities
      or bugs (“errors”) may be found from time to time in the Company’s existing, new
      or enhanced products after commencement of commercial shipments, resulting
      in
      loss of revenues or injury to the Company’s reputation.  In the past,
      the Company has discovered errors in the it’s products and as a result, has
      experienced delays in the shipment of products.  Errors in the
      Company’s products may be caused by defects in third-party software incorporated
      into the Company’s products.  If so, the Company may not be able to
      fix these defects without the cooperation of these software
      providers.  Since these defects may not be as significant to the
      software provider as they are to us, the Company may not receive the rapid
      cooperation that may be required.  The Company may not have the
      contractual right to access the source code of third-party software, and even
      if
      the Company does have access to the code, the Company may not be able to fix
      the
      defect.  Since the Company’s customers use the Company’s products for
      critical business applications, any errors, defects or other performance
      problems could result in damage to the Company’s customers’
business.  These customers could seek significant compensation from us
      for their losses.  Even if unsuccessful, a product liability claim
      brought against us would likely be time consuming and costly.





**Some
      competitors are larger and have greater financial and operational resources
      that
      may give them an advantage in the market.**





16


Many
      of
      the Company’s competitors are larger and have greater financial and operational
      resources.  This may allow them to offer better pricing terms to
      customers in the industry, which could result in a loss of potential or current
      customers or could force us to lower prices.  Any of these actions
      could have a significant effect on revenues.  In addition, the
      competitors may have the ability to devote more financial and operational
      resources to the development of new technologies that provide improved operating
      functionality and features to their product and service offerings.  If
      successful, their development efforts could render the Company’s product and
      service offerings less desirable to customers, again resulting in the loss
      of
      customers or a reduction in the price the Company can demand for the Company’s
      offerings.








***Risks
      Relating To The Company’s Common Stock***





**If
      the Company fails to remain current on its reporting requirements, the Company
      could be removed from the OTC Bulletin Board, which would limit the ability
      of
      broker-dealers to sell the Company’s securities and the ability of stockholders
      to sell their securities in the secondary market.**





Companies
      trading on the OTC Bulletin Board, like us, must be reporting issuers under
      Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”), and must be current in reports required under Section 13 to maintain
      price quotation privileges on the OTC Bulletin Board.  If the Company
      fails to remain current on its reporting requirements, the Company could be
      removed from the OTC Bulletin Board.  As a result, the market
      liquidity for the Company’s securities could be severely and adversely affected
      by limiting the ability of broker-dealers to sell the Company’s securities and
      the ability of stockholders to sell their securities in the secondary
      market.





**The
      Company’s common stock is subject to the “penny stock” rules of the SEC and the
      trading market in the Company’s securities is limited, which makes transactions
      in the Company’s stock cumbersome and may reduce the value of an investment in
      the Company.**





The
      Securities and Exchange Commission has adopted Rule 15g-9 under the Exchange
      Act, which establishes the definition of a “penny stock,” for the purposes
      relevant to the Company, as any equity security that has a market price of
      less
      than $5.00 per share or an exercise price of less than $5.00 per share, subject
      to certain exceptions.  For any transaction involving a penny stock,
      unless exempt, the rules require:





§
            that
                a broker or dealer approve a person’s account for transactions in penny
                stocks; and


§
            the
                broker or dealer receive from the investor a written agreement to
                the
                transaction, setting forth the identity and quantity of the penny
                stock to
                be purchased.





In
      order
      to approve a person’s account for transactions in penny stocks, the broker or
      dealer must:





§
            obtain
                financial information and investment experience objectives of the
                person;
                and


§
            make
                a reasonable determination that the transactions in penny stocks
                are
                suitable for that person and the person has sufficient knowledge
                and
                experience in financial matters to be capable of valuating the risks
                of
                transactions in penny stocks.





The
      broker or dealer must also deliver, prior to any transaction in a penny stock,
      a
      disclosure schedule prescribed by the Commission relating to the penny stock
      market, which, in highlight form:





§
            sets
                forth the basis on which the broker or dealer made the suitability
                determination; and


§
            that
                the broker or dealer received a signed, written agreement from the
                investor prior to the transaction.





Generally,
      brokers may be less willing to execute transactions in securities subject to
      the
“penny stock” rules.  This may make it more difficult for investors to
      dispose of the Company’s common stock and cause a decline in the market value of
      the Company’s stock.





Disclosure
      also has to be made about the risks of investing in penny stocks in both public
      offerings and in secondary trading and about the commissions payable to both
      the
      broker-dealer and the registered representative, current quotations for the
      securities, and the rights and remedies available to an investor in cases of
      fraud in penny stock transactions.  Finally, monthly statements have
      to be sent disclosing recent price information for the penny stock held in
      the
      account and information on the limited market in penny stocks.





**The
      limited public market for the Company’s securities may adversely affect an
      investor’s ability to liquidate an investment in the
      Company.**





17


Although
      the Company’s common stock is currently quoted on the OTC Bulletin Board
      (OTCBB), there is limited trading activity.  The Company can give no
      assurance that an active market will develop, or if developed, that it will
      be
      sustained.  If you acquire shares of the Company’s common stock, you
      may not be able to liquidate the Company’s shares should you need or desire to
      do so.





**Future
      issuances of the Company’s shares may lead to future dilution in the value of
      the Company’s common stock, will lead to a reduction in shareholder voting
      power, and may prevent a change in Company control.**





The
      shares may be substantially diluted due to the following:





§
            Issuance
                of common stock in connection with funding agreements with third
                parties
                and future issuances of common and preferred stock by the Board of
                Directors; and


§
            The
                Board of Directors has the power to issue additional shares of common
                stock and preferred stock and the right to determine the voting,
                dividend,
                conversion, liquidation, preferences and other conditions of the
                shares
                without shareholder approval.





Stock
      issuances may result in reduction of the book value or market price of
      outstanding shares of common stock.  If the Company issues any
      additional shares of common or preferred stock, proportionate ownership of
      common stock and voting power will be reduced.  Further, any new
      issuance of common or preferred shares may prevent a change in control or
      management.





**Compliance
      with the rules established by the SEC pursuant to Section 404 of the
      Sarbanes-Oxley Act of 2002 will be complex. Failure to comply in a timely manner
      could adversely affect investor confidence and the Company’s stock
      price.**





Rules
      adopted by the SEC pursuant to
      Section 404 of the Sarbanes-Oxley Act of 2002 requirethe Companyto perform an annual assessment ofitsinternal controls over financial
      reporting, certify the effectiveness of those controls and secure an attestation
      ofthe
      Company’sassessment byitsindependent registered public
      accountants. The standards that must be met for management to assess the
      internal controls over financial reporting as now in effect are new and complex,
      and require significant documentation, testing and possible remediation to
      meet
      the detailed standards.The
      Company haslimited
      experience with these standards, and may encounter problems or delays in
      completing activities necessary to make an assessment ofthe Company’sinternal controls over financial
      reporting. Due tothe
      Company’slimited personnel
      resources and lack of experience,itmay encounter problems or delays in
      completing the implementation of any requested improvements and receiving an
      attestation of the assessment byitsindependent registered public
      accountants. Ifthe
      Companycannot perform the
      assessment or certify thatitsinternal controls over financial
      reporting are effective, orthe Company’sindependent registered public
      accountants are unable to provide an unqualified attestation on such assessment,
      investor confidence and share value may be negatively
      impacted.





**Critical
      Accounting Policies**





This
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations discuss the Company’s Financial Statements, which have been prepared
      in accordance with accounting principles generally accepted in the United
      States.





We
      commenced operations in the software development and professional services
      business during 1990. The preparation of our financial statements requires
      management to make estimates and assumptions that affect reported amounts of
      assets and liabilities and the disclosure of contingent assets and liabilities
      at the date of the financial statements and the reported amounts of revenues
      and
      expenses during the reporting period. On an ongoing basis, management evaluates
      its estimates and assumptions, including those related to inventory, income
      taxes, revenue recognition and restructuring initiatives. We anticipate that
      management will base its estimates and judgments on historical experience of
      the
      operations we may acquire and on various other factors that are believed to
      be
      reasonable under the circumstances, the results of which form the basis for
      making judgments about the carrying value of assets and liabilities that are
      not
      readily apparent from other sources. Actual results may differ from these
      estimates under different assumptions or conditions.





Management
      believes the following critical accounting policies, among others, will affect
      its more significant judgments and estimates used in the preparation of our
      Consolidated Financial Statements.





**Income
      Taxes*****.***In determining the carrying
      value of the Company’s net deferred tax assets, the Company must assess the
      likelihood of sufficient future taxable income in certain tax jurisdictions,
      based on estimates and assumptions, to realize the benefit of these assets.
      If
      these estimates and assumptions change in the future, the Company may record
      a
      reduction in the valuation allowance, resulting in an income tax benefit in
      the
      Company’s Statements of Operations. Management evaluates the realizability of
      the deferred tax assets and assesses the valuation allowance
      quarterly.





18


**Goodwill
      and Other Long-Lived Asset Valuations*****.***In
      June 2001, the FASB issued SFAS 141, “Business Combinations”, and SFAS 142,
“Goodwill and Other Intangible Assets”, effective for fiscal years beginning
      after December 15, 2001 with early adoption permitted for companies with fiscal
      years beginning after March 15, 2001. We adopted the new rules on accounting
      for
      goodwill and other intangible assets during the first quarter of fiscal 2004.
      Under the new rules, goodwill and intangible assets deemed to have indefinite
      lives will no longer be amortized but will be subject to annual impairment
      tests
      in accordance with the statements. Other intangible assets will continue to
      be
      amortized over their useful lives.





**Revenue
      Recognition**.  The Company derives revenues from four primary
      sources, software licenses, maintenance and support services, professional
      services and software subscription.  New software licenses include the sale
      of software runtime license fees associated with deployment of the Company’s
      software products.  Software license maintenance updates and product
      support are typically annual contracts with customers that are paid in advance
      or specified as terms in the contract This provides the customer access to
      new
      software releases, maintenance releases, patches and technical support
      personnel.  Professional service sales are derived from the sale of
      services to design, develop and implement custom software applications.
      Subscription is derived from the sale of Supply Chain Profit Link, a category
      management product that is sold on a subscription basis.




License
      fees revenue from the sale of software licenses is recognized upon delivery
      of
      the software unless specific delivery terms provide otherwise.  If not
      recognized upon delivery, revenue is recognized upon meeting specified
      conditions, such as, meeting customer acceptance criteria.  In no
      event is revenue recognized if significant Company obligations remain
      outstanding.  Customer payments are typically received in part upon
      signing of license agreements, with the remaining payments received in
      installments pursuant to the agreements.  Until revenue recognition
      requirements are met, the cash payments received are treated as deferred
      revenue.





Maintenance
      and support services that are sold with the initial license fee are recorded
      as
      deferred revenue and recognized ratably over the initial service
      period.  Revenues from maintenance and other support services provided
      after the initial period are generally paid in advance and are recorded as
      deferred revenue and recognized on a straight-line basis over the term of the
      agreements.





Professional
      Services revenues are recognized in the period that the service is provided
      or
      in the period such services are accepted by the customer if acceptance is
      required by agreement.





Subscription
      revenues are recognized on a contractual basis, for one or more
      years.  These fees are generally collected in advance of the services
      being performed and the revenue is recognized ratably over the respective
      months, as services are provided.





**Stock-Based
      Compensation**.   Prior to July 1, 2006, as permitted
      under Statement of Financial Accounting Standards (“SFAS”) No. 123, the Company
      accounted for its stock options, warrants and plans following the recognition
      and measurement principles of Accounting Principles Board (“APB”) Opinion No.
      25, “Accounting for Stock issued to Employees,” and related interpretations.
      Accordingly, no stock-based compensation expense had been reflected in the
      Company’s statements of operations as all options granted had an exercise price
      equal to the market value of the underlying common stock on the date of grant
      and the related number of shares granted was fixed at that point in
      time.




In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      123(R), “Share Based Payment.” This statement revised SFAS No. 123 by
      eliminating the option to account for employee stock options under APB No.
      25
      and requires companies to recognize the cost of employee services received
      in
      exchange for awards of equity instruments based on the grant-date fair value
      of
      those awards.




Effective
      July 1, 2006, the Company adopted the fair value recognition provisions of
      SFAS
      No. 123(R) using the modified prospective application method. Under this
      transition method, the Company recorded compensation expense on a straight-line
      basis for the year ended June 30, 2007, for: (a) the vesting of options granted
      prior to July 1, 2006 (based on the grant-date fair value estimated in
      accordance with the original provisions of SFAS No. 123, and previously
      presented in the pro-forma footnote disclosures), and (b) stock-based awards
      granted subsequent to July 1, 2006 (based on the grant-date fair value estimated
      in accordance with the provisions of SFAS No. 123(R)). In accordance with the
      modified prospective application method, results for the year ended June 30,
      2006 have not been restated.





**Capitalization
      of Software Development Costs** The Company accounts for research and
      development costs in accordance with several accounting pronouncements,
      including SFAS No. 2, Accounting for Research and Development Costs, and
      SFAS No. 86, Accounting for the Costs of Computer Software to be Sold,
      Leased, or Otherwise Marketed. SFAS No. 86 specifies that costs incurred
      internally in researching and developing a computer software product should
      be
      charged to expense until technological feasibility has been established for
      the
      product. Once technological feasibility is established, all software costs
      should be capitalized until the product is available for general release to
      customers. Judgment is required in determining when technological feasibility
      of
      a product is established. We have determined that technological feasibility
      for
      our software products is reached shortly after a working prototype is complete
      and meets or exceeds design specifications including functions, features, and
      technical performance requirements.  Costs incurred after
      technological feasibility is established have been and will continue to be
      capitalized until such time as when the product or enhancement is available
      for
      general release to customers.





19


**Off-Balance
      Sheet Arrangements**


None





**Item
      7.  Financial Statements**




See
      the
      index to consolidated financial statements and consolidated financial statement
      schedules included herein as Item 13.





**Item
      8.  Changes In and Disagreements With Accountants on Accounting and
      Financial Disclosure**





None





**Item
      8A.  Controls and Procedures**





(a)
            Evaluation
                of disclosure controls and
                procedures.





Under
      the
      supervision and with the participation of our Management, including our
      principal executive officer and principal financial officer, we conducted an
      evaluation of the effectiveness of the design and operations of our disclosure
      controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under
      the
      Securities Exchange Act of 1934, as of June 30, 2007. Based on this evaluation,
      the Company’s Chief Executive Officer and Chief Financial Officer concluded that
      our disclosure controls and procedures are effective to ensure that information
      required to be disclosed in the reports submitted under the Securities and
      Exchange Act of 1934 is recorded, processed, summarized and reported within
      the
      time periods specified in Securities and Exchange Commission (“SEC”) rules and
      forms, including to ensure that information required to be disclosed by the
      Company is accumulated and communicated to management, including the principal
      executive officer and principal financial officer, as appropriate to allow
      timely decisions regarding required disclosure.







(b)
            Changes
                in internal controls over financial
                reporting.





The
      Company’s Chief Executive Officer and Chief Financial Officer have determined
      that there have been no changes in the Company’s internal control over financial
      reporting during the period covered by this report identified in connection
      with
      the evaluation described in the above paragraph that have materially affected,
      or are reasonably likely to materially affect, Company’s internal control over
      financial reporting.





**Item
      8B.  Other Information**





Not
      applicable


























**(REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK)**
































20


**PART
      III**





**Item
      9.  Directors, Executive Officers, Promoters and Control Persons;
      Compliance**


**With
      Section 16(a) of the Exchange Act**





The
      Board
      of Directors and executive officers consist of the persons named in the table
      below.  Vacancies in the Board of Directors may only be filled by the
      Board of Directors by majority vote at a Board of Director's meeting of which
      stockholders holding a majority of the issued and outstanding shares of capital
      stock are present.  The directors are elected annually by the
      stockholders at the annual meeting.  Each director shall be elected
      for the term of one year, and until his or her successor is elected and
      qualified, or until earlier resignation or removal.  The bylaws
      provide for at least one director.  The directors and executive
      officers are as follows:





Name
            
            Age
            
            Position
–
CommitteeRandall
                K. Fields
            
            60
            
            Chief
                Executive OfficerChairman
                of the Board and Director*William
                Dunlavy
            
            51
            
            Former
                Chief Financial Officer and Secretary**Robert
                Hermanns
            
            63
            
            Director,
                Senior Vice-President Sales***John
                R. Merrill
            
            37
            
            Chief
                Financial Officer and Treasurer****Edward
                L. Clissold
            
            51
            
            SecretaryThomas
                W Wilson
            
            75
            
            Director
                and Compensation Committee ChairmanEdward
                C. Dmytryk
            
            61
            
            Director
                and Audit Committee Chairman





*Appointed
      CFO on 8/23/04, resigned 8/31/07


**
      Appointed Director and Senior Vice-President on 3/15/07


***Appointed
      CFO and Treasurer on 9/10/07.


****Appointed
      Secretary on 9/10/07





**Randall
      K. Fields** has been the Chief Executive Officer, and Chairman of the
      Board of Directors since June, 2001.  Mr. Fields founded Park City
      Group, Inc., a software development company based in Park City, Utah, in 1990
      and has been its President, Chief Executive Officer, and Chairman of the Board
      since its inception in 1990.  Mr. Fields has been responsible for the
      strategic direction of Park City Group, Inc. since its inception.  Mr.
      Fields co-founded Mrs.  Fields Cookies with his then wife, Debbi
      Fields.  He served as Chairman of the Board of Mrs. Fields Cookies
      from 1978 to 1990.  In the early 1970's Mr. Fields established a
      financial and economic consulting firm called Fields Investment
      Group.  Mr. Fields received a Bachelor of Arts degree in 1968 and a
      Masters of Arts degree in 1970 from Stanford University, where he was Phi Beta
      Kappa, Danforth Fellow and National Science Foundation Fellow.







**William
      Dunlavy** was appointed CFO and Secretary as of August,
      2004.  On August 31, 2007 the Company and Mr. Dunlavy mutually agreed
      to terminate his employment agreement. Mr. Dunlavy joined Fresh Market Manager
      LLC in 1999 as its Chief Operating Officer and continued in the same capacity
      with the acquisition of Fresh Market Manager LLC in 2001. He has been
      responsible for the design of the business functionality in the Fresh Market
      Manager product in addition to his business operations activities for Park
      City
      Group.   He was formerly the Chief Operating Officer at Mrs.
      Fields Cookies, Director of Operations at Golden Corral Family Restaurants,
      head
      of Fresh Foods at Harris Teeter, Inc. and head of Fresh Foods at Raley’s and Bel
      Air Supermarkets.  He has also served as a board member of the
      International Deli, Dairy, Bakery Association.






**Robert
      P. Hermanns** joined the Company in March of 2007 as Senior Vice
      President. Mr. Hermanns is responsible for U.S. customer relations and
      corporate development and also is an acting member of the Park City Group Board
      of Directors. Mr. Hermanns has over 40 years experience in all phases of retail
      and wholesale grocery operations. Mr. Hermanns was President and Chief Executive
      Officer and Vice Chairman of the Board of Directors of Associated Grocers,
      Inc.
      from 2002 through 2005. He is also the former Chief Operating Officer of Weis
      Markets, a $2 billion NYSE company operating 163 retail food markets in the
      Mid-Atlantic States. Prior to joining AG and Weis Markets, Mr. Hermanns enjoyed
      a 30-year career with American Stores Company, an $18 billion food and drug
      retailer, where he held a number of executive management positions including
      Chief Operating Officer for Procurement and Logistics. A graduate of Western
      Michigan University with a BS degree in Food Marketing, Mr. Hermanns also holds
      an MBA from the University of Southern California.







21


**John
      R. Merrill** joined Park City Group in August of 2006 as it’s’ Director
      of Finance, Accounting & Administration. On September 10, 2007 he was
      promoted and appointed to Chief Financial Officer and Treasurer. He has over
      17
      years experience in both the public and private sectors of finance and
      accounting.  Prior to joining Park City Group, he was most recently
      Chief Financial Officer for Peak Solutions Group a consulting firm focused
      on
      providing business solutions for growth oriented small business.  From
      1998 to 2003, Mr. Merrill was Controller for Clear Channel Communications,
      Inc.,
      a $19 billion publicly traded broadcasting and outdoor advertising company
      operating 1,200 radio stations in the United States. Prior to joining Clear
      Channel, Mr. Merrill was the Controller of the Academies Division of IMG, a
      $2
      billion global leader in professional athlete management whose clients included
      Tiger Woods, Venus Williams, Pete Sampras and Anna
      Kournikova.  Throughout his career, Mr. Merrill has had significant
      exposure to various sectors of both sporting goods retail and service
      industries.  Mr. Merrill began his career with KPMG and holds a
      Bachelors and a Masters degree in Accounting from the University of South
      Florida.





**Edward
      L. Clissold** was appointed Secretary on September 10,
      2007.  In January of 2007, Mr. Clissold was hired as an employee of
      Park City Group, Inc as General Counsel.  Formerly, he was in private
      practice and was the Company’s corporate counsel. Mr. Clissold has over 25 years
      experience in the legal profession and has been affiliated with Park City Group,
      Inc and its predecessors for over 20 years.  He was also General
      Counsel for Mrs. Fields Cookies, Inc. for approximately 10 years. Mr. Clissold
      received a Bachelors of Science Degree in Finance from the University of Utah
      and a Juris Doctorate from Brigham Young University.




**Thomas
      W. Wilson, Jr**.  has been a director since August,
      2001.  From 1995 to 1999, Mr. Wilson was the Chairman of the Board of
      Information Resources, Inc., a Chicago, Illinois-based provider of point-of-sale
      information based business solutions to the consumer packaged goods
      industry.  From 1998 to 1999, Mr. Wilson was the Interim Chief
      Executive Officer of Information Resources, Inc.  From 1966 to 1990,
      Mr. Wilson was employed in various capacities with McKinsey & Co., a
      management consulting company.  In 1968, Mr. Wilson was elected a
      Partner of McKinsey and Co., and in 1972 he was elected a Senior
      Partner.  Mr. Wilson received a Bachelor of Arts Degree from Dartmouth
      College and a Masters of Business Administration Degree from the Wharton School
      of the University of Pennsylvania.




**Edward
      C. Dmytryk** has been a director since June, 2000.  In October 2002,
      Mr. Dmytryk took on additional responsibilities as acting Chief Financial
      Officer and as such resigned from the Audit Committee.  He served in this
      capacity until June 2003.     Later in 2003, Mr. Dmytryk
      became the Chief Executive Officer of Safescript Pharmacies, Inc (SAFS) due
      to a
      request by the Safescript Pharmacies, Inc. Board of Directors to restructure
      the
      Company during a liquidity crisis and an SEC investigation.  He
      restructured the Company and helped arranged the sale of assets to a group
      of
      interested investors.  He remains the CEO due to the complications of the
      sale and the damage caused by hurricane Katrina in New Orleans where 3 operating
      pharmacies were located.  Currently, Mr. Dmytryk is the CEO of RxPert,
      Inc., a Pharmacy company located in Ponte Vedra, Florida.   Mr.
      Dmytryk graduated Summa Cum Laude from the Citadel, the Military College of
      South Carolina in 1968 with a Bachelor of Science Degree and was an Instructor
      Pilot in the United States Air Force.








Our
      Executive Officers are elected by the Board on an annual basis and serve at
      the
      discretion of the Board.





**Compliance
      with Section 16(a)**





Section
      16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s
      directors and executive officers, and persons who beneficially own more than
      10%
      of a registered class of the Company’s equity securities, to file reports of
      beneficial ownership and changes in beneficial ownership of the Company’s
      securities with the SEC on Forms 3 (Initial Statement of Beneficial Ownership),
      4 (Statement of Changes of Beneficial Ownership of Securities) and 5 (Annual
      Statement of Beneficial Ownership of Securities).  Directors,
      executive officers and beneficial owners of more than 10% of the Company’s
      Common Stock are required by SEC regulations to furnish the Company with copies
      of all Section 16(a) forms that they file.   The Company believes
      that, during the year ended June 30, 2006, the Reporting Persons met all
      applicable Section 16(a) filing requirements





**Code
      of Ethics**





The
      Company adopted their code of ethics by unanimous board of directors vote in
      our
      October 2005 Board Meeting and is included by reference herein in Item 13,
      Exhibits.





**Committees
      of the Board of Directors**





Our
      board
      of directors has an audit committee, a compensation committee and a nominating
      and corporate governance committee, each of which has the composition and
      responsibilities described below:





**Audit
      Committee.**





22


The
      audit
      committee provides assistance to the board of directors in fulfilling its legal
      and fiduciary obligations in matters involving our accounting, auditing,
      financial reporting, internal control and legal compliance functions by
      approving the services performed by our independent accountants and reviewing
      their reports regarding our accounting practices and systems of internal
      accounting controls. The audit committee also oversees the audit efforts of
      our
      independent accountants and takes those actions as it deems necessary to satisfy
      it that the accountants are independent of management. The audit committee
      currently consists of Edward C. Dmytryk (Chairman) and Thomas W. Wilson Jr.,
      each of whom is a non-management member of our board of directors. Edward C.
      Dmytryk is also our audit committee financial expert as currently defined under
      Securities and Exchange Commission rules.  We believe that the
      composition of our audit committee meets the criteria for independence under,
      and the functioning of our audit committee complies with the applicable
      requirements of, the Sarbanes-Oxley Act of 2002, the current rules of the
      Over-the-Counter Bulletin Board Stock Market and Securities and Exchange
      Commission rules and regulations. We intend to comply with future audit
      committee requirements as they become applicable to us.





**Compensation
      Committee.**





The
      compensation committee determines our general compensation policies and the
      compensation provided to our directors and officers. The compensation committee
      also reviews and determines bonuses for our officers and other employees. In
      addition, the compensation committee reviews and determines equity-based
      compensation for our directors, officers, employees and consultants and
      administers our stock option plans and employee stock purchase plan. The current
      members of the compensation committee are Thomas W. Wilson Jr. (Chairman),
      and
      Edward C. Dmytryk, each of whom is a non-management member of our board of
      directors. We believe that the composition of our compensation committee meets
      the criteria for independence under, and the functioning of our compensation
      committee complies with the applicable requirements of, the Sarbanes-Oxley
      Act
      of 2002, the current rules of the Over-the-Counter Bulletin Board Stock Market
      and Securities and Exchange Commission rules and regulations. We intend to
      comply with future compensation committee requirements as they become applicable
      to us.





**Nominating
      and Corporate Governance Committee.**





The
      nominating and corporate governance committee is responsible for making
      recommendations to the board of directors regarding candidates for directorships
      and the size and composition of the board. In addition, the nominating and
      corporate governance committee is responsible for overseeing our corporate
      governance guidelines and reporting and making recommendations to the board
      concerning corporate governance matters. The current members of the nominating
      and governance committee are Randall K Fields (Chairman), and Edward C. Dmytryk.
      We believe that the composition of our nominating and governance committee
      meets
      the criteria for independence under, and the functioning of our nominating
      and
      corporate governance committee complies with the applicable requirements of,
      the
      Sarbanes-Oxley Act of 2002, the current rules of the Over-the-Counter Bulletin
      Board Stock Market and Securities and Exchange Commission rules and regulations.
      We intend to comply with future nominating and corporate governance committee
      requirements as they become applicable to us.





**Item
      10.  Executive Compensation**





The
      following table sets forth information concerning the compensation paid to
      the
      Company’s Chief Executive Officer, and all persons serving as the Company’s most
      highly compensated executive officers other than its chief executive officer,
      who were serving as executive officers as of June 30, 2007 and whose annual
      compensation exceeded $100,000 during such year (collectively the “Named
      Executive Officers”).





**SUMMARY
      COMPENSATION TABLE**





**Name
                and Principal Position**
            
            **Year**
            
            **Salary**
              **($)**
            
            **Bonus**
              **($)**
            
            **Stock
                Awards ($)****(1)**
            
            **Options
                Awards ($)(2)**
            
            **All
                Other Compensation**
              **($)**
            
            **Total**
              **($)**Randall
                K. Fields
            
            2007
            
            350,000(3)
            
            —
            
            —
            
            —
            
            63,535
                (4)
            
            413,535Chief
                Executive Officer and
            
            2006
            
            279,167(3)
            
            —
            
            45,833
            
            —
            
            71,126
                (4)
            
            396,126Chairman
                of the BoardJohn
                R. Merrill
            
            2007
            
            80,000(5)
            
            5,000
            
            4,602
            
            —
            
            —
            
            89,602Chief
                Financial OfficerWilliam
                Dunlavy
            
            2007
            
            225,000
            
            —
            
            —
            
            —
            
            —
            
            225,000Senior
                Vice-President
            
            2006
            
            197,625
            
            —
            
            22,500
            
            239,992
            
            —
            
            460,117Robert
                Hermanns
            
            2007
            
            64,167(6)
            
            —
            
            —
            
            150,440
            
            —
            
            214,607Senior
                Vice-President Sales







23




(1)
            Stock
                awards consist solely of shares of restricted common stock. Amounts
                shown
                do not reflect compensation actually received by the named executive
                officer. Instead, the amounts shown are the compensation costs recognized
                by the Company during the fiscal year for stock awards as determined
                pursuant to FAS 123R.


(2)
            Amounts
                shown do not reflect compensation actually received by the named
                executive
                officer. Instead, the amounts shown are the compensation costs recognized
                by the Company during the fiscal year for option awards as determined
                pursuant to FAS 123R. These compensation costs reflect option awards
                granted in and prior to fiscal 2007. The assumptions used to calculate
                the
                value of option awards are set forth under Note
                1.


(3)
            A
                significant part of Mr. Fields compensation is paid to a management
                company wholly owned by Mr. Fields.


(4)
            These
                amounts include premiums paid on Life Insurance policies of $41,452
                and
                $52,958 for 2007 and 2006, respectively, Company car related expenses
                of
                $19,081 and $15,347 for 2007 and 2006, respectively; and medical
                premiums
                of $3,002 and $2,821 for 2007 and 2006,
                respectively.


(5)
            Mr.
                Merrill joined the Company in August
                2006.


(6)
            Mr.
                Hermanns joined the Company in March
                2007.





**Employment
      Agreements**





Park
      City
      Group has an employment agreement with its chief executive officer, Randall
      K.
      Fields, dated July 1, 2005. The compensation for Mr. Fields, under the terms
      of
      the agreement, provides for a portion of the compensation to be provided
      pursuant to an employment agreement and the balance to be provided pursuant
      to
      the terms of a services agreement between the Company and Fields Management,
      Inc., an executive management services provider, a company wholly owned by
      Mr.
      Fields. The term of the two agreements is five years ending June 30, 2008,
      with
      automatic one-year renewals.  The combined agreements provide
      for:


·
            An
                annual base compensation of
                $350,000,


·
            Use
                of a company vehicle,


·
            Employee
                benefits that are generally provided to Park City Group, Inc. employees,
                and


·
            A
                bonus to be determined annually by the Compensation Committee of
                the Board
                of Directors.





Park
      City
      Group has an employment agreement with its Chief Financial Officer, William
      Dunlavy, and dated effective July 1, 2006.  The Company and Mr.
      Dunlavy have mutually terminated the agreement on August 31,
      2007.  There were no disagreements between the Company and Mr.
      Dunlavy. His agreement provided Mr. Dunlavy with the following
      compensation:


·
            An
                annual base compensation of
                $225,000,


·
            Employee
                benefits that are generally provided to Park City Group, Inc.
                employees,


·
            Participation
                in Senior Executive Bonus Plan, and


·
            Stock
                options equal to 2 to 1 for each share of stock purchased, with an
                exercise price of $3.50 or the current market price, which ever is
                higher.





Park
      City
      Group has an employment agreement with its Senior Vice-President of Sales,
      Robert Hermanns, and dated effective March 15, 2007.  This agreement
      provides Mr. Hermanns with the following compensation:


·
            Annual
                base compensation of $220,000,


·
            Employee
                benefits that are generally provided to Park City Group, Inc.
                employees,


·
            A
                bonus equal to 1% of annual salary for every 2% increase in gross
                revenues
                over the previous year’s actual revenue with additional terms set forth in
                Exhibit 10.16 attached hereto,


·
            Stock
                options equal to 2 to 1 for each share of stock
                purchased.





Park
      City
      Group has an employment with its Chief Financial Officer and Treasurer, John
      Merrill, dated effective September 10, 2007. This agreement provides Mr. Merrill
      with the following compensation:


·
            Annual
                base compensation of $165,000,


·
            Employee
                benefits that are generally provided to Park City Group, Inc.
                employees,


·
            Stock
                grants equal to 2 for 1 for each share of stock
                purchased.








**(REMAINDER
      OF PAGE IS INTENTIONALLY LEFT BLANK)**























24


**Outstanding
      Equity Awards**





The
      following table sets forth information with respect to the value of all
      outstanding equity awards held by our named executive officers at the end of
      fiscal 2007.





OUTSTANDING
      EQUITY AWARDS AT FISCAL 2007 YEAR-END





Option
                Awards
            
            Stock
                AwardsName
            
            Number
                of Securities Underlying Unexercised Options # Exercisable
            
            Number
                of Securities Underlying Unexercised Options #
                Unexercisable
            
            Equity
                Incentive Plan Awards: Number of Securities Underlying Unexercised
                Unearned Options (#)
            
            Option
              Exercise
              Price
              ($)
            
            Option
              Expiration
              Date
            
            Number
                of Shares or Units of Stock That Have Not Vested (#)
            
            Market
                Value of Units of Stock That Have Not Vested ($)
            
            Equity
                Incentive Plan Awards: Number of Unearned Shares, Units or Other
                Rights
                That Have Not Vested (#)
            
            Equity
                Incentive Plan Awards: Market or Payout Value of Unearned Shares,
                Units or
                Other Rights That Have Not Vested ($)Randall
                K. Fields
            
            40,000
            
            —
            
            —
            
            2.00
            
            8/16/07
            
            —
            
            —
            
            —
            
            —135,232
            
            —
            
            —
            
            2.00
            
            11/12/07
            
            —
            
            —
            
            —
            
            —John
                Merrill
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —William
                Dunlavy
            
            10,000
            
            —
            
            —
            
            1.50
            
            7/18/13
            
            —
            
            —
            
            —
            
            —6,772
            
            —
            
            —
            
            3.50
            
            7/7/15
            
            —
            
            —
            
            —
            
            —80,000
            
            —
            
            —
            
            3.25
            
            6/30/11
            
            —
            
            —
            
            —
            
            —Robert
                Hermanns
            
            74,000
            
            —
            
            —
            
            2.76
            
            6/29/10
            
            —
            
            —
            
            —
            
            —





**Director
      Compensation**





The
      continuing outside directors, Edward C. Dmytryk and Thomas W. Wilson, Jr.,
      receive the following compensation:





Annual
      cash compensation of $10,000 payable at the rate of $2,500 per
      quarter.  The Company has the right to pay this amount in the form of
      shares of Company Stock.





Annual
      options to purchase $20,000 of the Company restricted common stock at the market
      value of the shares on the date of the grant, which is to be the first day
      the
      stock market is open in January of each year.





The
      following table sets forth information concerning the compensation earned during
      fiscal 2007 by our current directors:





**DIRECTOR
      COMPENSATION FOR FISCAL 2007**


Name
              
              Fees
                Earned
                  or
                Paid
                  in
                Cash
                ($)
              
              
              Stock
                Awards
                ($)
              
              
              Option
                Awards
                  ($)
                (1)
              
              
              Non-equity
                Incentive
                  Plan
                Compensation
                ($)
              
              
              Nonqualified
                Deferred
                Compensation
                Earnings
                ($)
              
              
              All
                  Other
                Compensation
                ($)
              
              
              Total
                ($)Edward
                  Dmytryk
              
              
              2,500
              
              
              
              17,500
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              20,000Thomas
                  Wilson
              
              
              2,500
              
              
              
              17,500
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              20,000


(1)
            Stock
                awards consist solely of stock grants of fully vested Company common
                stock.  Amounts shown do not reflect compensation actually
                received by the director.  Instead, the amounts shown are the
                compensation costs recognized by the Company during the fiscal year
                for
                stock awards as determined pursuant to FAS
                123R.





25


**401(k)
      Retirement Plan.**





The
      Company offers an employee benefit plan under Benefit Plan Section 401(k) of
      the
      Internal Revenue Code.  On May 1, 2007 the Company modified its
      trustee and administrator of its 401(k) from Fiserv / Alliance Benefits to
      Fidelity Investments. Employees who have attained the age of 18 are immediately
      eligible to participate.  The Company, at its discretion, may match
      employee’s contributions at a percentage determined annually by the board of
      directors.  The Company does not currently match
      contributions.





**Indemnification
      for Securities Act Liabilities**





Nevada
      law authorizes, and the Company's Bylaws and Indemnity Agreements provide for,
      indemnification of the Company's directors and officers against claims,
      liabilities, and amounts paid in settlement, and expenses in a variety of
      circumstances.  Indemnification for liabilities arising under the Act
      may be permitted for directors, officers and controlling persons of the Company
      pursuant to the foregoing or otherwise.  However, the Company has been
      advised that, in the opinion of the Securities and Exchange Commission, such
      indemnification is against public policy as expressed in the Act and is,
      therefore, unenforceable.





**Stock
      Options and Warrants**





The
      Company has stock option plans that enable it to issue to officers, directors,
      consultants and employees nonqualified and incentive options to purchase common
      stock.  At June 30, 2007, a total of 125,876 of such options were
      outstanding with exercise prices ranging from $1.50 to $3.50 per
      share.





At
      June
      30, 2007 a total of 1,508,641 warrants to purchase shares of common stock were
      outstanding.  Of those warrants, 506,448 were issued in connection
      with certain debt financings; 128,571 were issued in connection with an equity
      investment by an officer; 376,485 were issued as a commission for placement
      of
      equity securities; 417,137 were issued in connection with an equity placement;
      and 80,000 were issued to an officer as additional
      compensation.  These warrants have exercise prices ranging from $2.00
      to $4.00 per share and expire between August 16, 2007 and June 22,
      2012.





**Compensation
      Committee Interlocks and Insider Participation**





No
      executive officers of the Company serve on the Compensation Committee (or in
      a
      like capacity) for the Company or any other entity.




















**(REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK)**








































26


**Item
      11.  Security Ownership of Certain Beneficial Owners and
      Management**





**Security
      Ownership of Certain Beneficial Owners**





The
      following table sets forth information regarding shares of our preferred stock
      beneficially owned as of September 20, 2007 by:  (i) each of our
      officers and directors; (ii) all officers and directors as a group; and (iii)
      each person known by us to beneficially own five percent or more of the
      outstanding shares of our preferred stock.  Percent ownership is
      calculated based on 584,000 shares of Series A Convertible Preferred Stock
      outstanding at September 20, 2007.





Name
            
            Preferred
                Stock
            
            
            %
                Ownership of ClassHillson
                Partners LP
            
            
            50,000
            
            
            
            8.56%Meadowbrook
                Opportunity Fund LLC
            
            
            40,000
            
            
            
            6.85%London
                Family Trust
            
            
            30,000
            
            
            
            5.14%





The
      following table sets forth information regarding shares of our common stock
      beneficially owned as of September 20, 2007 by:  (i) each of our
      officers and directors; (ii) all officers and directors as a group; and (iii)
      each person known by us to beneficially own five percent or more of the
      outstanding shares of our common stock.





Name
            
            Common
                Stock
            
            
            Common
                Stock
              Options
                Exercisable
              Within
                60 Days
            
            
            Common
                Stock
              Purchase
                Warrant Exercisable
              Within
                60 days
            
            
            Total
                Stock and
              Stock
                Based
              Holdings
                (1)
            
            
            %
                Ownership
              of
                Class (1)Randall
                K. Fields (2)(4)
            
            
            4,172,499
            
            
            
            -
            
            
            
            135,232
            
            
            
            4,307,731
            
            
            
            47.36%Riverview
                Financial, Corp (3)
            
            
            4,172,499
            
            
            
            -
            
            
            
            135,232
            
            
            
            4,307,731
            
            
            
            47.36%William
                Dunlavy (4)
            
            
            35,542
            
            
            
            16,772
            
            
            
            80,000
            
            
            
            132,314
            
            
            
            1.46%Robert
                Hermanns (4)
            
            
            51,310
            
            
            
            74,000
            
            
            
            
            
            
            
            125,310
            
            
            
            1.39%John
                R. Merrill (4)
            
            
            2,223
            
            
            
            -
            
            
            
            -
            
            
            
            2,223
            
            
            
            *Edward
                C. Dmytryk (4)
            
            
            36,305
            
            
            
            6,667
            
            
            
            -
            
            
            
            42,972
            
            
            
            *Thomas
                W. Wilson (4)
            
            
            213,860
            
            
            
            6,667
            
            
            
            60,847
            
            
            
            281,374
            
            
            
            3.12%





*
      Less
      than 1%


(1)
            For
                purposes of this table “beneficial ownership” is determined in accordance
                with Rule 13d-3 of the Securities Exchange Act of 1934, pursuant
                to which
                a person or group of persons is deemed to have “beneficial ownership” of
                any common shares that such person or group has the right to acquire
                within 60 days after September 20, 2007. For purposes of computing
                the
                percentage of outstanding common shares held by each person or group
                of
                persons named above, any shares that such person or group has the
                right to
                acquire within 60 days after September 20, 2007, are deemed outstanding
                but are not deemed to be outstanding for purposes of computing the
                percentage ownership of any other person or group.  As of
                September 20, 2007, there were 8,960,703 shares of our common stock
                issued
                and outstanding.  There were also outstanding options, and
                warrants entitling the holders to purchase 380,185 shares of our
                common
                stock owned by officers and/or directors of Park City
                Group.


(2)
            Includes
                3,682,604 shares of common stock and 135,232 warrants to purchase
                common
                shares held in the name of Riverview Financial Corp. and 2,688 shares
                of
                common stock held in the name of Fields Management, Inc. of which
                Randall
                K Fields is the beneficial owner.


(3)
            Includes
                487,206 shares of common stock held in the name of Randall K. Fields.
                Riverview Financial Corp. is beneficially controlled by Randall K.
                Fields.


(4)
            These
                are the officers and directors of Park City
                Group.








**Change
      in Control**





The
      Company is not currently engaged in any activities or arrangements that it
      anticipates will result in a change in control of the Company.





**Item
      12.  Certain Relationships and Related
      Transactions**





The
      Company had a note payable to Riverview Financial Corporation (Riverview),
      in
      the principal amount of $3,296,406.  The chief executive of Riverview
      is also the chief executive of the Company.  In June 2004, the Company
      issued 49,600 shares of common stock to Riverview to subordinate to the extended
      Whale Investments note.  In March 2006 the note payable and accrued
      interest of $294,334 were converted to 1,324,693 shares of common
      stock.   See Note 12 and 16 to the audited financial
      statements.





27


Riverview
      had loaned the Company $345,000 under a note payable bearing interest at
      18%.  Payments were made monthly for interest only, with the principal
      due in December 2005.  Riverview was issued 17,143 shares of common
      stock as an inducement to make the loan.  The note was extended in
      June 2004 to December 2005 and again in January 2006 to December
      2006.  The loan was retired with cash proceeds from a note payable
      funding from a bank in March 2006.





The
      Company’s CEO has made loans to the Company through Riverview Financial Corp. a
      wholly owned entity, to cover short term cash needs pursuant to a line of credit
      promissory note payable.  Repayments are made as funds are available,
      with an extended due date of June 15, 2007 and interest is at 12%.  In
      February 2006, the line of credit the Company had with Riverview was cancelled
      and reissued in the amount of $800,000.  The reissued line of credit
      had an interest rate of 12% with a fee for draws on the line.  There
      was no balance due under the line of credit at June 15, 2007, when the line
      of
      credit expired.    See note 7 to the audited financial
      statements.





In
      December 2002 the Company obtained a $2,000,000 note payable funding from Whale
      Investment, Ltd.  The note bore interest at 18%, payable monthly, and
      was due in December 2005, as extended.  Whale Investment, Ltd. is
      controlled by an individual who was already a shareholder of the Company at
      the
      time of the loan.  The extended note was due December 2005 and the
      Company paid to Whale Investments $40,000 in cash and 20,000 in common stock
      valued at $80,000 as consideration for the extension.  The note
      payable was retired with cash generated from operations in August
      2005.





























**(REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK)**






























































28


**Item
      13.  Exhibits**





**Exhibits,
      Financial Statements and Schedules**





The
      Consolidated Financial Statements of the Company and its subsidiaries are filed
      as part of this Report:





·
            Report
                of Independent Registered Public Accounting
                Firm


·
            Consolidated
                Balance Sheets as of June 30, 2007 and June 30,
                2006


·
            Consolidated
                Statements of Operations for the years ended June 30, 2007 and
                2006


·
            Consolidated
                Statements of Stockholders’ Equity for the years ended June 30, 2007 and
                2006


·
            Consolidated
                Statements of Cash Flows for the years ended June 30, 2007 and
                2006


·
            Notes
                to Consolidated Financial
                Statements





Exhibit
                Number
            Description





2.1
            Reorganization  Agreement
                by and Among  Amerinet.com,  Inc., Randall K. Fields
                and Riverview Financial Corp. (1)


2.2
            First
                Amendment to Reorganization Agreement
                (1)


2.3
            Second
                Amendment to Reorganization Agreement
                (1)


3.1
            Article
                Of Incorporation (2)


3.2
            Certificate
                Of Amendment (3)


3.3
            Bylaws
                (2)


3.4
            Certificate
                of Amendment (4)


4.1
            Certificate
                of Designation (5)


4.2
            Amendment
                to Confidential Private Placement Memorandum
                (5)


10.1
            Warrant
                To Purchase Common Stock, Dated August 12, 2002
                (6)


10.2
            Warrant
                To Purchase Common Stock, Dated November 12, 2002
                (7)


10.4
            Placement
                Agent Agreement (8)


10.5
            Software
                License Agreement(9)


10.6
            Consulting
                Services Agreement(9)


10.7
            Right
                Of First Offer Agreement(9)


10.8
            Warrant
                To Purchase Common Stock, Dated June 14, 2006
                (10)


10.9
            Securities
                Purchase Agreement (10)


10.10
            Amended
                Employment Agreement Randall K. Fields
                (11)


10.11
            Services
                Agreement with Fields Management, Inc.
                (11)


10.12
            Commercial
                Real Estate Lease – Pinebrook (4)


10.13
            Warrant
                to Purchase Common Stock, Dated June 30, 2006
                (4)


10.14
            Accord
                and Satisfaction of an Employment Agreement with William Dunlavy
                (11)


10.15
            Employment
                Agreement with William Dunlavy (11)


10.16
            Employment
                Agreement with Robert Hermanns (12)


10.17
            Placement
                Agent Agreement (5)


10.18
            Stock
                Purchase Agreement (5)


10.19
            Warrant
                to Purchase Common Stock, dated June 1-22, 2007
                (5)


10.20
            Warrant
                to Purchase Common Stock, dated June 22, 2007
                (5)


10.21
            Employment
                Agreement with John Merrill (13)


14.1
            Code
                of Ethics (14)


31.1
            Certification
                of Principal Executive Officer pursuant to Section 302 of Sarbanes
                Oxley
                Act of 2002


31.2
            Certification
                of Principal Financial Officer pursuant to Section 302 of Sarbanes
                Oxley
                Act of 2002


32.1
            Certification
                of Principal Executive Officer and Principal Financial Officer pursuant
                to
                18 U.S.C. Section 1350





(1)
            Incorporated
                by reference from our Form 8-K dated June 13,
                2001.


(2)
            Incorporated
                by reference from our Form DEF 14C dated June 5,
                2002.


(3)
            Incorporated
                by reference from our Form 10-QSB for the year ended Sept 30,
                2005.


(4)
            Incorporated
                by reference from our Form 10-KSB dated September 29,
                2006.


(5)
            Incorporated
                by reference from our Form 8-K dated June 27,
                2007.


(6)
            Incorporated
                by reference from our Form 8-K dated August 16,
                2002.


(7)
            Incorporated
                by reference from our Form 8-K dated November 27,
                2002.


(8)
            Incorporated
                by reference from our Form 8-K dated June 14,
                2006.


(9)
            Incorporated
                by reference from our Form 8-K dated August 05,
                2005.





29


(10)
            Incorporated
                by reference from our Form SB-2/A dated October 20,
                2006.


(11)
            Incorporated
                by reference from our Form 10KSA/A dated October 13,
                2006.


(12)
            Incorporated
                by reference from our Form 8-K dated March 26,
                2007.


(13)
            Incorporated
                by reference from out Form 8-K dated September 12,
                2007.


(14)
            Incorporated
                by reference from our Form 10-QSB dated November 10,
                2005.





**Item
      14.  Principal Accounting Fees and Services**





The
      Audit Committee has adopted policies
      and procedures to oversee the external audit process including engagement
      letters, estimated fees and solely pre-approving all permitted non-audit work
      performed by HJ & Associates, LLC. The Committee has pre-approved all fees
      for work performed.




The
      Audit Committee has considered
      whether the services provided by HJ & Associates, LLC as disclosed below in
      the captions “Audit-Related Fee”, “Tax Fees” and “All Other Fees” and has
      concluded that such services are compatible with the independence of HJ &
Associates, LLC as the Company’s principal accountants.




For
      the fiscal years 2007 and 2006, the
      Audit Committee pre-approved all services described below in the captions “Audit
      Fees”, “Audit-Related Fees”, “Tax Fees” and “All Other Fees”. For fiscal year
      2007 and 2006, no hours expended on HJ & Associates, LLC’s engagement to
      audit the Company’s financial statements were attributed to work performed by
      persons other than full-time, permanent employees of HJ & Associates,
      LLC.





The
      aggregate fees billed for professional services by HJ & Associates, LLC in
      fiscal year 2007 and 2006:





Type
                of Fees
            
            2007
            
            
            2006Audit
                Fees
            
            $
            59,900
            
            
            $
            49,500Audit-Related
                Fees
            
            
            -
            
            
            
            -Tax
                Fees
            
            
            -
            
            
            
            -All
                Other Fees
            
            
            -
            
            
            
            -Total
            
            $
            59,900
            
            
            $
            49,500
































**(REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK)**









































30


**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





**PARK
      CITY GROUP, INC.**


(Registrant)





Date:    September
                28, 2007
            ____________________________
              
              By  /s/
                Randall
                K.  Fields
              
              Principal
                Executive Officer,
              Chairman
                of the Board and Director





In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.








Signature
            
            Title
            
            Date________________________
              /s/
                Randall K.  Fields
              Randall
                K.  Fields
            
            Chief
                Executive Officer,
              Chairman
                of the Board and Director
              (Principal
                Executive Officer)
            
            September
                28, 2007________________________/s/
                John R, Merrill
              John
                R. Merrill
            
            Chief
                Financial Officer and Treasurer
              (Principal
                Financial Officer & Principal Accounting Officer)
            
            September
                28, 2007________________________/s/
                Edward C.  Dmytryk
              Edward
                C.  Dmytryk
            
            Director
            
            September
                28, 2007________________________/s/
                Thomas W. Wilson, Jr.
              Thomas
                W. Wilson, Jr.
            
            Director
            
            September
                28, 2007












































31


**Report
      of Independent Registered Public Accounting Firm**





Board
      of
      Directors and Shareholders of


Park
      City
      Group, Inc and Subsidiaries


Park
      City, Utah





We
      have
      audited the accompanying consolidated balance sheets of Park City Group, Inc.
      and Subsidiaries as of June 30, 2007 and 2006, and the related consolidated
      statements of operations, stockholders' equity and cash flows for the years
      then
      ended. These consolidated financial statements are the responsibility of the
      Company’s management. Our responsibility is to express an opinion on these
      consolidated financial statements based on our audits.





We
      conducted our audits in accordance with standards of the Public Company
      Accounting Oversight Board (United States).  Those standards require
      that we plan and perform the audits to obtain reasonable assurance about whether
      the consolidated financial statements are free of material
      misstatement.  An audit includes examining, on a test basis, evidence
      supporting the amounts and disclosures in the consolidated financial
      statements.  An audit also includes assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall consolidated financial statement
      presentation.  We believe that our audits provide a reasonable basis
      for our opinions.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Park City
      Group, Inc. and Subsidiaries as of June 30, 2007 and 2006, and the results
      of
      their operations and their cash flows for the years then ended in conformity
      with accounting principles generally accepted in the United States of
      America.





/s/
      HJ
& Associates, LLC





HJ
&
      Associates, LLC


Salt
      Lake
      City, Utah


September
      26, 2007





























**(REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK)**






















32


**PARK
      CITY GROUP, INC. AND SUBSIDIARIES**


**Consolidated
      Balance Sheets**





**Assets**
            
            June
                30,
                2007
            
            
            June
                30,
                2006Current
                Assets:Cash
                and cash
                equivalents
            
            $
            3,273,424
            
            
            $
            3,517,060Restricted
                cash
            
            
            1,940,000
            
            
            
            -Receivables,
                net of allowance of
                $26,958 and $126,324 at June 30, 2007 and 2006,
                respectively
            
            
            480,332
            
            
            
            103,190Unbilled
                receivables
            
            
            556,170
            
            
            
            237,641Prepaid
                expenses and other current
                assets
            
            
            100,722
            
            
            
            173,687Total
                current
                assets
            
            
            6,350,648
            
            
            
            4,031,578Property
                and equipment,
                net
            
            
            481,533
            
            
            
            84,741Other
                assets:Deposits
                and other
                assets
            
            
            27,738
            
            
            
            29,958Capitalized
                software costs,
                net
            
            
            914,967
            
            
            
            680,187Total
                other
                assets
            
            
            942,705
            
            
            
            710,145Total
                assets
            
            $
            7,774,886
            
            
            $
            4,826,464**Liabilities
                and
                Stockholders' Equity**Current
                liabilities:Accounts
                payable
            
            $
            388,212
            
            
            $
            112,136Accrued
                liabilities
            
            
            272,600
            
            
            
            230,062Deferred
                revenue
            
            
            505,299
            
            
            
            648,686Current
                portion of capital lease
                obligations
            
            
            71,185
            
            
            
            16,774Derivative
                liability
            
            
            -
            
            
            
            489,624Notes
                payable
            
            
            1,940,000
            
            
            
            -Total
                current
                liabilities
            
            
            3,177,296
            
            
            
            1,497,282Long-term
                liabilities:Long-term
                note payable, net of
                discount of $97,404 at June 30, 2006
            
            
            -
            
            
            
            1,842,596Capital
                lease obligations, less
                current portion
            
            
            225,414
            
            
            
            4,948Total
                long-term
                liabilities
            
            
            225,414
            
            
            
            1,847,544Total
                liabilities
            
            
            3,402,710
            
            
            
            3,344,826Commitments
                and
                contingenciesStockholders'
                equity:Preferred
                stock, $0.01 par value,
                30,000,000 shares authorized; 584,000 shares of Series A Convertible
                Preferred issued and outstanding at June 30, 2007
            
            
            5,840
            
            
            
            -Common
                stock, $0.01 par value,
                50,000,000 shares authorized; 8,997,703 and 8,931,312 issued and
                outstanding at June 30, 2007 and 2006, respectively
            
            
            89,977
            
            
            
            89,312Additional
                paid-in
                capital
            
            
            26,166,128
            
            
            
            20,564,933Subscription
                receivable
            
            
            (106,374
            )
            
            
            -Accumulated
                deficit
            
            
            (21,783,395
            )
            
            
            (19,172,607
            )Total
                stockholders'
                equity
            
            
            4,372,176
            
            
            
            1,481,638Total
                liabilities and
                stockholders' equity
            
            $
            7,774,886
            
            
            $
            4,826,464





See
      accompanying notes to consolidated financial statements.


33


**PARK
      CITY GROUP, INC. AND SUBSIDIARIES**


**Consolidated
      Statements of Operations**


**For
      the Years Ended June 30, 2007 and 2006**





2007
            
            
            2006Revenues:Subscriptions
            
            $
            89,251
            
            
            $
            182,083Maintenance
                and
                support
            
            
            1,513,016
            
            
            
            2,271,997Professional
                services
            
            
            464,396
            
            
            
            1,004,224License
                fees
            
            
            525,503
            
            
            
            3,626,821Total
                Revenues
            
            
            2,592,166
            
            
            
            7,085,125Operating
                expenses:Research
                and
                development
            
            
            1,717,793
            
            
            
            1,451,069Sales
                and
                marketing
            
            
            1,508,276
            
            
            
            1,410,406General
                and
                administrative
            
            
            2,002,552
            
            
            
            1,585,364Depreciation
                and
                amortization
            
            
            368,636
            
            
            
            550,161Total
                operating
                expenses
            
            
            5,597,257
            
            
            
            4,997,000Income
                (loss) from
                operations
            
            
            (3,005,091
            )
            
            
            2,088,125Other
                income
                (expense):Gain
                (loss) on derivative
                liability
            
            
            88,785
            
            
            
            (34,513
            )Gain
                on marketable
                securities
            
            
            18,386
            
            
            
            -Gain
                on disposition of
                assets
            
            
            943
            
            
            
            -Interest
                expense
            
            
            (114,650
            )
            
            
            (660,016
            )Total
                other income
                (expense)
            
            
            (6,536
            )
            
            
            (694,529
            )Income
                (loss) before income
                taxes
            
            
            (3,011,627
            )
            
            
            1,393,596(Provision)
                benefit for income
                taxes
            
            
            -
            
            
            
            -Net
                (loss)
                income
            
            $
            (3,011,627
            )
            
            $
            1,393,596Weighted
                average shares,
                basic
            
            
            8,936,000
            
            
            
            6,084,000Weighted
                average shares,
                diluted
            
            
            8,936,000
            
            
            
            6,263,000Basic
                income (loss) per
                share
            
            $
            (0.34
            )
            
            $
            0.23Diluted
                income (loss) per
                share
            
            $
            (0.34
            )
            
            $
            0.22





See
      accompanying notes to consolidated financial statements.





34


**Park
      City Group, Inc. and Subsidiaries**


**Consolidated
      Statements of Stockholders’ Equity**


**For
      the Years Ended June 30, 2007 and 2006**





Preferred
                Stock
            
            
            Common
                Stock
            
            
            Subscription
            
            
            Additional
              Paid-In
            
            
            AccumulatedShares
            
            
            Amount
            
            
            Shares
            
            
            Amount
            
            
            Receivable
            
            
            Capital
            
            
            Deficit
            
            
            TotalBalance,
                June 30,
                2005
            
            
            -
            
            
            $
            -
            
            
            
            5,651,118
            
            
            $
            56,511
            
            
            $
            -
            
            
            $
            12,806,743
            
            
            $
            (20,566,203
            )
            
            $
            (7,702,949
            )Stock
                issued
                for:Compensation
            
            
            -
            
            
            
            -
            
            
            
            74,248
            
            
            
            742
            
            
            
            -
            
            
            
            204,105
            
            
            
            -
            
            
            
            204,847Debt
                refinancing
            
            
            -
            
            
            
            -
            
            
            
            4,500
            
            
            
            45
            
            
            
            -
            
            
            
            15,705
            
            
            
            -
            
            
            
            15,750Debt
                conversion
            
            
            -
            
            
            
            -
            
            
            
            1,324,693
            
            
            
            13,247
            
            
            
            -
            
            
            
            3,460,356
            
            
            
            -
            
            
            
            3,473,603Exercise
                of
                options
            
            
            -
            
            
            
            -
            
            
            
            58,571
            
            
            
            586
            
            
            
            -
            
            
            
            116,557
            
            
            
            -
            
            
            
            117,143Cash,
                net of offering
                costs
            
            
            -
            
            
            
            -
            
            
            
            1,818,182
            
            
            
            18,181
            
            
            
            -
            
            
            
            3,961,467
            
            
            
            -
            
            
            
            3,979,648Net
                income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,393,596
            
            
            
            1,393,596Balance,
                June 30,
                2006
            
            
            -
            
            
            
            -
            
            
            
            8,931,312
            
            
            
            89,312
            
            
            
            -
            
            
            
            20,564,933
            
            
            
            (19,172,607
            )
            
            
            1,481,638Cumulative-effect
                adjustment of
                adopting FSP EITF 00-19-2
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            -
            
            
            
            400,839
            
            
            
            400,839Cancellation
                of partial
                shares
            
            
            -
            
            
            
            -
            
            
            
            (546
            )
            
            
            (4
            )
            
            
            -
            
            
            
            (168
            )
            
            
            -
            
            
            
            (172
            )Stock
                issued
                for:Compensation
            
            
            
            
            
            
            
            
            
            
            29,937
            
            
            
            299
            
            
            
            
            
            
            
            71,799
            
            
            
            -
            
            
            
            72,098Cash,
                net of offering
                costs
            
            
            584,000
            
            
            
            5,840
            
            
            
            37,000
            
            
            
            370
            
            
            
            (106,374
            )
            
            
            5,379,124
            
            
            
            -
            
            
            
            5,278,960Compensation
                expense under FAS
                123R
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            150,440
            
            
            
            -
            
            
            
            150,440Net
                (loss)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (3,011,627
            )
            
            
            (3,011,627
            )Balance,
                June 30,
                2007
            
            
            584,000
            
            
            $
            5,840
            
            
            
            8,997,703
            
            
            $
            89,977
            
            
            $
            (106,374
            )
            
            $
            26,166,128
            
            
            $
            (21,783,395
            )
            
            $
            4,372,176











See
      accompanying notes to consolidated financial statements.


35


**PARK
      CITY GROUP, INC. AND SUBSIDIARIES**


**Consolidated
      Statements of Cash Flows**


**For
      the Years Ended June 30, 2007 and 2006**





**2007**
            
            
            **2006**Cash
                flows from operating
                activities:Net
                (loss)
                income
            
            $
            (3,011,627
            )
            
            $
            1,393,596Adjustments
                to reconcile net
                income (loss) to net cash provided by (used in) operating activities:Depreciation
                and
                amortization
            
            
            278,609
            
            
            
            288,433Bad
                debt
                expense
            
            
            (47,022
            )
            
            
            70,324(Gain)
                loss on derivative
                liability
            
            
            (88,785
            )
            
            
            34,513Stock
                issued for services and
                expenses
            
            
            222,539
            
            
            
            204,849Amortization
                of discounts on
                debt
            
            
            97,404
            
            
            
            224,389Gain
                on marketable
                securities
            
            
            (18,386
            )
            
            
            -Gain
                on recovery of bad
                debt
            
            
            (52,344
            )
            
            
            -Gain
                on sale of
                property
            
            
            (943
            )
            
            
            -Saleof marketable
                securities
            
            
            70,730
            
            
            
            -(Increase)
                decrease
                in:Trade
                Receivables
            
            
            (330,120
            )
            
            
            153,700Other
                receivables
            
            
            (318,530
            )
            
            
            (208,515
            )Prepaids
                and other
                assets
            
            
            75,185
            
            
            
            (141,585
            )(Decrease)
                increase
                in:Accounts
                payable
            
            
            276,076
            
            
            
            (516,262
            )Accrued
                liabilities
            
            
            36,761
            
            
            
            (86,646
            )Deferred
                revenue
            
            
            (143,387
            )
            
            
            (234,738
            )Related
                party
                payable
            
            
            -
            
            
            
            97,000Accrued
                interest, related
                party
            
            
            5,777
            
            
            
            (553,924
            )Net
                cash provided by (used in)
                operating activities
            
            
            (2,948,063
            )
            
            
            725,134Cash
                Flows From Investing
                Activities:Purchase
                of property and
                equipment
            
            
            (182,297
            )
            
            
            (22,146
            )Capitalization
                of software
                costs
            
            
            (419,393
            )
            
            
            (564,651
            )Restricted
                Cash
            
            
            (1,940,000
            )
            
            
            -Proceeds
                from disposal of
                property
            
            
            3,040
            
            
            
            -Net
                cash used in investing
                activities
            
            
            (2,538,650
            )
            
            
            (586,797
            )Cash
                Flows From Financing
                Activities:Net
                (payments)  proceeds
                in lines of credit
            
            
            -
            
            
            
            (716,743
            )Proceeds
                from issuances of stock,
                net of offering costs of $556,785
            
            
            5,278,788
            
            
            
            4,434,764Payment
                to extend
                note
            
            
            -
            
            
            
            (9,000
            )Proceeds
                from
                debt
            
            
            -
            
            
            
            1,833,300Payments
                on notes payable and
                capital leases
            
            
            (35,711
            )
            
            
            (2,373,268
            )Net
                cash provided by financing
                activities
            
            
            5,243,077
            
            
            
            3,169,053Net
                increase (decrease) in cash
                and cash equivalents
            
            
            (243,636
            )
            
            
            3,307,390Cash
                and cash equivalents at
                beginning of year
            
            
            3,517,060
            
            
            
            209,670Cash
                and cash equivalents at end
                of year
            
            $
            3,273,424
            
            
            $
            3,517,060Supplemental
                Disclosure of Cash
                Flow Information:Cash
                paid for income
                taxes
            
            $
            -
            
            
            $
            -Cash
                paid for
                interest
            
            $
            157,235
            
            
            $
            1,177,320




See
      accompanying notes to consolidated financial statements.


36


**Park
      City Group, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**June
      30, 2007 and June 30, 2006**





**1.**
            **Summary
                of Significant Accounting Policies, Organization and Principles of
                Consolidation**





Business
      Activity


The
      Company designs, develops, markets and supports proprietary software
      products.  These products are designed to be used in retail businesses
      having multiple locations to assist in the management of business operations
      on
      a daily basis and communicate results of operations in a timely
      manner.   In addition the Company has built a consulting practice
      for business improvement that centers around the companies proprietary software
      products.  The principal markets for the Company's products are retail
      companies, financial services, branded food manufacturers and display
      manufacturing companies which have operations in North America and, to a lesser
      extent, in Europe and Asia.





Principles
      of Consolidation


The
      financial statements presented herein reflect the consolidated financial
      position of Park City Group, Inc. and Subsidiaries.  All inter-company
      transactions and balances have been eliminated in consolidation.





Reclassifications


Certain
      amounts in the 2006 financial statements have been reclassified to conform
      to
      the 2007 presentation.  These reclassifications did not result in any
      change to previously reported total assets, net income (loss) or stockholders’
equity.





Use
      of
      Estimates


The
      preparation of consolidated financial statements in conformity with U.S.
      generally accepted accounting principles requires management to make estimates
      and assumptions that materially affect the amounts reported in the consolidated
      financial statements.  Actual results could differ from these
      estimates.  The methods, estimates and judgments the Company uses in
      applying its most critical accounting policies have a significant impact on
      the
      results it reports in its financial statements.  The U.S. Securities
      and Exchange Commission has defined the most critical accounting policies as
      the
      ones that are most important to the portrayal of the Company’s financial
      condition and results, and require the Company to make its most difficult and
      subjective judgments, often as a result of the need to make estimates of matters
      that are inherently uncertain.  Based on this definition, the
      Company’s most critical accounting policies include:  revenue
      recognition, allowance for doubtful accounts, capitalization of software
      development costs and impairment of long-lived assets.





Cash
      and Cash Equivalents


The
      Company considers all short-term instruments with an original maturity of three
      months or less to be cash equivalents.





Concentration
      of Credit Risk and Significant Customers


The
      Company maintains cash in bank deposit accounts, which, at times, may exceed
      federally insured limits.  The Company has not experienced any losses
      in such accounts and believes it is not exposed to any significant credit risk
      on cash and cash equivalents.





Financial
      instruments which potentially subject the Company to concentration of credit
      risk consist primarily of trade receivables. In the normal course of business,
      the Company provides credit terms to its customers.  Accordingly, the
      Company performs ongoing credit evaluations of its customers and maintains
      allowances for possible losses which when realized have been within the range
      of
      management's expectations.  The Company does not require collateral
      from its customers.





The
      Company's accounts receivable are derived from sales of products and services
      primarily to customers operating multi-location retail and grocery
      stores.  At June 30, 2007 and June 30, 2006, net accounts receivable
      includes amounts due from customers totaling $480,332 and $103,190,
      respectively.





During
      the years ended June 30, 2007 and June 30, 2007, the Company received revenues
      from new customers of approximately $505,000 and $4.57 million, respectively
      and
      revenues of approximately $2.1 million and $2.5 million, respectively from
      existing customers for continued support and additional license
      sales.








During
      the years ended June 30, 2007 and 2006, the Company had sales to major customers
      that exceeded 10 percent of revenues are as follows:





2007Customer
                A
            
            $
            453,625Customer
                B
            
            
            342,7482006Customer
                C
            
            $
            3,547,185





37


Allowance
      for Doubtful Accounts Receivable


The
      Company offers credit terms on the sale of the Company’s products to a
      significant majority of the Company’s customers and require no collateral from
      these customers. The Company performs ongoing credit evaluations of the
      Company’s customers’ financial condition and maintains an allowance for doubtful
      accounts receivable based upon the Company’s historical experience and a
      specific review of accounts receivable at the end of each period. As of June
      30,
      2007, the allowance for doubtful accounts was $26,958.





Depreciation
      and Amortization


Depreciation
      and amortization of property and equipment is computed using the straight line
      method based on the following estimated useful lives:




YearsFurniture
                and fixtures
            
            7Computer
                equipment
            
            3Equipment
                under capital leases
            
            3Leasehold
                improvements
            
            see
                below





Leasehold
      improvements are amortized over the shorter of the remaining lease term or
      the
      estimated useful life of the improvements.





Warranties


The
      Company offers a limited warranty against software defects for a general period
      of (90) ninety days.  Customers who are not completely satisfied with
      their software purchase may attempt to be reimbursed for their purchases outside
      the warranty period.  The Company accrues amounts for such warranty
      settlements that are probable and can be reasonably estimated.





Revenue
      Recognition


The
      Company derives revenues from four primary sources, software licenses,
      maintenance and support services, professional services and software
      subscription.  New software licenses include the sale of software runtime
      license fees associated with deployment of the Company’s software
      products.  Software license maintenance updates and product support are
      typically annual contracts with customers that are paid in advance or specified
      as terms in the contract. This provides the customer access to new software
      releases, maintenance releases, patches and technical support personnel. 
Professional service sales are derived from the sale of services to design,
      develop and implement custom software applications. Subscription is derived
      from
      the sale of Supply Chain Profit Link, a category management product that is
      sold
      on a subscription basis.




License
      revenue from the sale of software licenses is recognized upon delivery of the
      software unless specific delivery terms provide otherwise.  If not
      recognized upon delivery, revenue is recognized upon meeting specified
      conditions, such as, meeting customer acceptance criteria.  In no
      event is revenue recognized if significant Company obligations remain
      outstanding.  Customer payments are typically received in part upon
      signing of license agreements, with the remaining payments received in
      installments pursuant to the agreements.  Until revenue recognition
      requirements are met, the cash payments received are treated as deferred
      revenue.





Maintenance
      and support services that are sold with the initial license fee are recorded
      as
      deferred revenue and recognized ratably over the initial service
      period.  Revenues from maintenance and other support services provided
      after the initial period are generally paid in advance and are recorded as
      deferred revenue and recognized on a straight-line basis over the term of the
      agreements.





Professional
      services revenue is recognized in the period that the service is provided or
      in
      the period such services are accepted by the customer if acceptance is required
      by agreement.





Subscription
      revenues are recognized on a contractual basis, for one or more
      years.  These fees are generally collected in advance of the services
      being performed and the revenue is recognized ratably over the respective
      months, as services are provided.





Before
      the Company recognizes subscription revenue, the following criteria must be
      met:




1)           Evidence
      of a financial arrangement or agreement must exist between the Company and
      its
      customer.  Purchase orders, signed contracts, or electronic confirmation
      are three examples of items accepted by the Company to meet this
      criterion.




2)           Delivery
      of the products or services must have occurred.  The Company treats either
      physical or electronic delivery as having met this requirement.  The
      Company offers a 60-day free trial on beginning a subscription engagement and
      revenue is not recognized during this time. After the free trial ends the
      Company recognizes revenue ratably over the subscription period.









38


3)           The
      price of the products or services is fixed and measurable.




4)           Collectibility
      of the sale is reasonably assured and receipt is probable.  Collectibility
      of a sale is determined on a customer-by-customer basis. Typically the Company
      sells to large corporations which have demonstrated an ability to pay.  If
      it is determined that a customer may not have the ability to pay, revenue is
      deferred until the payment is collected.









Software
      Development Costs


The
      Company accounts for research and development costs in accordance with several
      accounting pronouncements, including SFAS No. 2, Accounting for Research
      and Development Costs, and SFAS No. 86, *“Accounting for the Costs of
      Computer Software to be Sold, Leased, or Otherwise Marketed.”*SFAS
      No. 86 specifies that costs incurred internally in researching and
      developing a computer software product should be charged to expense until
      technological feasibility has been established for the product. Once
      technological feasibility is established, all software costs should be
      capitalized until the product is available for general release to
      customers





From
      inception through January 2001, the Company viewed the software as an evolving
      product.  Therefore, all costs incurred for research and development
      of the Company's software products through January 2001 were expensed as
      incurred.  During January 2001, technological feasibility of a major
      revision to the Company's Fresh Market Manager and the Company's ActionManager
      4x development platform was established.  Development costs for Fresh
      Market Manager software incurred from January 2001 through September 2002,
      totaling $1,063,515, were capitalized.  These costs are being
      amortized on a straight-line basis over four years, beginning in September
      2002
      when the product was available for general release to
      customers.  During 2007 and 2006 capitalized development costs of
      $66,470 and $265,879, respectively were amortized into expense.





In
      July
      2005 and December 2006, the Company reached technological feasibility on 1
      new
      product and 2 major enhancements to existing product offerings.  The
      Company capitalized $419,393 and $613,717 of development costs associated with
      these products and enhancements for 2007 and 2006, respectively.  We
      anticipate these products being available for general release in the later
      part
      of FY2007.  We will continue capitalization until that
      time.





Research
      and Development Costs


Research
      and development costs include personnel costs, engineering, consulting, and
      contract labor and are expensed as incurred for software that has not achieved
      technological feasibility.





Income
      Taxes


The
      Company accounts for income taxes under the provision of Statement of Financial
      Accounting Standards No. 109, Accounting for Income Taxes.  This
      method requires the recognition of deferred tax liabilities and assets for
      the
      expected future tax consequences of temporary differences between tax bases
      and
      financial reporting bases of other assets and liabilities.





Earnings
      Per Share


The
      computation of basic (loss) earnings per common share is based on the weighted
      average number of shares outstanding during each year.  The
      computation of diluted earnings per common share is based on the weighted
      average number of shares outstanding during the year, plus the common stock
      equivalents that would arise from the exercise of stock options and warrants
      outstanding, using the treasury stock method and the average market price per
      share during the year.  Options and warrants to purchase 1,634,517 and
      990,125 shares of common stock at prices ranging from $1.50 to $4.00 per share
      were outstanding at June 30, 2007 and 2006, respectively.  Of these
      1,634,517 and 431,807 for 2007 and 2006, respectively, were not included in
      the
      diluted (loss) earnings per share calculation because the effect would have
      been
      anti-dilutive.





The
      shares used in the computation of the Company's basic and diluted earnings
      per
      common share are reconciled as follows:





June
                30, 2007
            
            
            June
                30, 2006Weighted
                average
            
            
            8,936,000
            
            
            
            6,084,000Dilutive
                effect of options and warrants
            
            
            -
            
            
            
            179,000Weighted
                average shares outstanding assuming dilution
            
            
            8,936,000
            
            
            
            6,263,000





Prior
      to
      July 1, 2006, as permitted under Statement of Financial Accounting Standards
      (“SFAS”) No. 123, the Company accounted for its stock options, warrants and
      plans following the recognition and measurement principles of Accounting
      Principles Board (“APB”) Opinion No. 25, “Accounting for Stock issued to
      Employees,” and related interpretations. Accordingly, no stock-based
      compensation expense had been reflected in the Company’s statements of
      operations as all options granted had an exercise price equal to the market
      value of the underlying common stock on the date of grant and the related number
      of shares granted was fixed at that point in time.




39


In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      123(R), “Share Based Payment.” This statement revised SFAS No. 123 by
      eliminating the option to account for employee stock options under APB No.
      25
      and requires companies to recognize the cost of employee services received
      in
      exchange for awards of equity instruments based on the grant-date fair value
      of
      those awards.




Effective
      July 1, 2006, the Company adopted the fair value recognition provisions of
      SFAS
      No. 123(R) using the modified prospective application method. Under this
      transition method, the Company recorded compensation expense on a straight-line
      basis for the year ended June 30, 2007, for: (a) the vesting of options granted
      prior to July 1, 2006 (based on the grant-date fair value estimated in
      accordance with the original provisions of SFAS No. 123, and previously
      presented in the pro-forma footnote disclosures), and (b) stock-based awards
      granted subsequent to July 1, 2006 (based on the grant-date fair value estimated
      in accordance with the provisions of SFAS No. 123(R)). In accordance with the
      modified prospective application method, results for the year ended June 30,
      2006 have not been restated.




The
      following pro-forma information, as required by SFAS No. 148, “Accounting for
      Stock-Based Compensation-Transition and Disclosure, an amendment of FASB
      Statement No. 123,” is presented for comparative purposes and illustrates the
      effect on net income (loss) and net income (loss) per common share for the
      year
      ended June 30, 2006 as if the Company had applied the fair value recognition
      provisions of SFAS No. 123 to stock-based employee compensation prior to July
      1,
      2006:





Year
                Ended
              June
                30, 2006Net
                IncomeAs
                reported
            
            $
            1,393,596Pro
                forma
            
            $
            1,113,946Income
                per common share-basic-as reported
            
            $
            0.23Income
                per common share-diluted-as reported
            
            $
            0.22Income
                per common share-basic-pro forma
            
            $
            0.18Income
                per common share-diluted-pro forma
            
            $
            0.18




Fair
      Value of Financial Instruments


The
      Company's financial instruments consist of cash, receivables, payables, accruals
      and notes payable.  The carrying amount of cash, receivables, payables
      and accruals approximates fair value due to the short-term nature of these
      items.  The notes payable also approximate fair value based on
      evaluations of market interest rates.




**2.**
            **Liquidity**





As
      shown
      in the consolidated financial statements for the fiscal year ended, June 30,
      2007, the Company had a negative cash flow from operations in the amount
      $2,948,063 compared to cash flow provided by operations of $725,134 for the
      year
      ending June 30, 2006.  This comparative difference of $3,673,197 is
      the result of a $3.00 million license sale that occurred in 2006 that did not
      occur in 2007. In addition to the decrease in license sales, the same customer
      chose not to renew its maintenance and professional services for 2007,
      approximately $600,000.





In
      June
      2007, the Company issued 584,000 shares of its Series A Convertible Preferred
      Stock.  The Company received $5,278,788 net of offering costs
      associated with the placement and cancellation of partial shares attributable
      to
      its reverse stock split that occurred in August of 2006. The Company utilized
      $1.94 million to collateralize its note payable and eliminate Riverview
      Financial as its guarantor.  The bank note and restricted cash
      collateralizing the loan bear the same interest rate. The remaining $3.3 million
      of cash and cash equivalents will be used to fund operations, capital expansion,
      and other general corporate purposes.





For
      the
      year ended, June 30, 2007, the Company experienced a decrease in total revenue.
      The 63% decrease in total comparative revenue is the result of lower license
      revenues, support, and services associated with one large client that did not
      recur in the year ending June 30, 2007. In March 2007, the Company began its
      new
      business initiative to market its products and services on a subscription
      basis.  This recurring revenue model is anticipated to provide a more
      reliable stream of revenue and working capital and reduce the Company’s reliance
      on large license contracts. Management believes that in combination with its
      equity placement in June of 2007, its evolution toward a subscription based
      model, and the release of 1 new product and 2 significant enhancements, to
      existing products will provide current and future operating cash flows. The
      Company believes that anticipated revenue growth will allow the Company to
      meet
      its minimum operating cash requirements for the next 12 months. The financial
      statements do not reflect any adjustments should the Company’s operations not be
      achieved.





Although
      the Company anticipates that it will meet its working capital requirements
      primarily through increased revenue and strict cost control, there can be no
      assurances that the Company will be able to meet its working capital
      requirements.  Should the Company desire to raise additional equity or
      debt financing, there are no assurances that the Company could do so on
      acceptable terms.


40


**3.**
            **Receivables**





Trade
      accounts receivable consist of the following at June 30, 2007 and
      2006:





2007
            
            
            2006Trade
                accounts receivable
            
            $
            507,290
            
            
            $
            229,514Allowance
                for doubtful accounts
            
            
            (26,958
            )
            
            
            (126,324
            )$
            480,332
            
            
            $
            103,190





Unbilled
      receivables consists of amounts recognized as revenue during the year for which
      invoices were sent subsequent to June 30, 2007 and June 30, 2006.








**4.**
            **Property
                and Equipment**





Property
      and equipment are stated at cost and consist of the following at June 30, 2007
      and 2006:





2007
            
            
            2006Computer
                equipment
            
            $
            429,929
            
            
            $
            1,455,396Furniture
                and equipment
            
            
            358,358
            
            
            
            207,251Leasehold
                improvements
            
            
            126,063
            
            
            
            85,795914,350
            
            
            
            1,748,442Less
                accumulated depreciation and amortization
            
            
            (432,817
            )
            
            
            (1,663,701
            )$
            481,533
            
            
            $
            84,741





Depreciation
      expense for the years ended June 30, 2007 and 2006 was $86,618 and $59,894,
      respectively.




**5.**
            **Capitalized
                software costs**





Capitalized
      software costs consist of the following at June 30, 2007 and 2006:





2007
            
            
            2006Capitalized
                software costs
            
            $
            2,096,627
            
            
            $
            1,677,234Less
                accumulated amortization
            
            
            (1,181,660
            )
            
            
            (997,047
            )$
            914,967
            
            
            $
            680,187





Amortization
      expense for the years ended June 30, 2007 and 2006 was $184,613 and $265,879,
      respectively.





Estimated
      aggregate amortization expenses for each of the next five years is as
      follows:





Year
                ending June 30:2008
            
            $
            323,4482009
            
            
            344,3702010
            
            
            226,2272011
            
            
            20,9222012
            
            $
            -





41




**6.**
            **Accrued
                Liabilities**





Accrued
      liabilities consist of the following at June 30, 2007 and 2006:





2007
            
            
            2006Accrued
                compensation
            
            $
            155,610
            
            
            $
            59,185Accrued
                vacation
            
            
            -
            
            
            
            110,717Accrued
                legal fees
            
            
            45,274
            
            
            
            17,710Other
                accrued liabilities
            
            
            43,598
            
            
            
            37,450Third-party
                license/support fees
            
            
            28,118
            
            
            
            -Accrued
                board compensation
            
            
            -
            
            
            
            5,000$
            272,600
            
            
            $
            230,062




**7.**
            **Related
                party line of credit**





In
      February 2006 the Company arranged an unsecured, revolving line of credit with
      Riverview Financial Corp, a wholly owned affiliate of the Company’s
      CEO.  The line bears interest at 12% with a fee for advances, and is
      repaid as funds availability permits.  The line of credit expired on
      June 15, 2007.  The limit on this line of credit is $800,000. The line
      was not renewed.





**8.**
            **Derivative
                Liability**





In
      conjunction with raising capital through the issuance of convertible debt,
      the
      Company has issued various warrants that have registration rights for the
      underlying shares.  As the contracts must be settled by the delivery
      of registered shares and the delivery of the registered shares is not controlled
      by the Company, pursuant to EITF 00-19,*“Accounting for Derivative Financial
      Instruments Indexed to, and Potentially Settled in, a Company’s own Stock,”*
      the net value of the warrants at the date of issuance was recorded as long-term
      derivative liability on the balance sheet as of June 21, 2006 $455,111 and
      the
      change in fair value from the date of issuance to June 30, 2006 has been
      included as a loss on derivative liability in the amount of $ 34,513 reflected
      on the Consolidated Statement of Operations. The total derivative liability
      as
      of June 30, 2006 was $489,624.





In
      accordance with FSP EITF 00-19-2 the derivative liability as of March 31, 2007
      of $400,839 was recorded as a cumulative adjustment and the change in fair
      value
      from June 30, 2006 to March 31, 2007 of $88,785 has been included as a gain
      on
      derivative liability on the Consolidated Statement of Operations.  The
“cumulative adjustment” has been reflected as an adjustment to Retained Earnings
      in the amount of $400,839.





**9.**
            **Notes
                payable and capital leases
                obligations**





The
      Company had the following notes payable and capital lease obligations at June
      30, 2007 and 2006:





2007
            
            
            2006Note
                payable to a Bank bearing interest at 6.7%, due March 31, 2008, secured
                by
                a certificate of deposit issued by the same bank, from inception
                through
                June 2007 the certificate was issued in the name of Riverview Financial
                corp.  In June 2007 a new certificate in the name of Park City
                Group was issued.  The certificate of deposit is recorded as
                restricted cash of $1,940,000 on the Consolidated Balance Sheet and
                earns
                interest at 6.7%, net of discount of $97,404 at June 30,
                2007.
            
            $
            1,940,000
            
            
            $
            1,842,596Capital
                Lease Obligations:Capital
                lease on computer equipment, due in monthly installments of $3,136
                decreasing through December 2007, imputed interest rates of
                10.9%
            
            
            45,746
            
            
            
            21,722Capital
                lease on computer equipment, due in monthly installments of $2,125,
                imputed interest rate of 8.9%
            
            
            94,986
            
            
            
            -Capital
                lease on furniture and equipment, due in monthly installments of
                $3,539,
                imputed interest rate of 11.2%
            
            
            155,867
            
            
            
            -2,236,599
            
            
            
            1,864,318Less
                current portion of capital lease obligations and notes
                payable
            
            
            (2,011,185
            )
            
            
            (16,774
            )$
            225,414
            
            
            $
            1,847,544


42




Maturities
      of notes payable and capital leases at June 30, 2007 are as
      follows:





Year
                ending June 30:2008
            
            $
            2,011,1852009
            
            
            67,5322010
            
            
            54,1252011
            
            
            59,9662012
            
            
            43,791$
            2,236,599





Capital
      Leases:  Amortization expense related to capitalized leases is
      included in depreciation expense and was $66,352 and $29,350 for the years
      ended
      June 30, 2007 and 2006, respectively.  Accumulated depreciation was
      $146,237 at June 30, 2007.  This amortized depreciation expenses
      relates to $501,042 of equipment purchased under capital lease agreements of
      which $416,221 is still under capital lease at June 30, 2007.





**10.**
            **Deferred
                Revenue**





Deferred
      revenue consisted of the following at June 30, 2007 and 2006:





2007
            
            
            2006License
                Sales
            
            $
            -
            
            
            $
            17,817Consulting
                Services
            
            
            9,675
            
            
            
            118,020Maintenance
                and Support
            
            
            495,624
            
            
            
            512,849$
            505,299
            
            
            $
            648,686




















**(REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK)**



































43


**11.**
            **Income
                Taxes**





Deferred
      taxes are provided on a liability method whereby deferred tax assets are
      recognized for deductible temporary differences and operating loss and tax
      credit carryforwards and deferred tax liabilities are recognized for taxable
      differences.  Temporary differences are the differences between the
      reported amounts of assets and liabilities and their tax
      bases.  Deferred tax assets are reduced by a valuation allowance when,
      in the opinion of management, it is more likely than not that some portion
      or
      all of the deferred tax assets will not be realized.  Deferred tax
      assets and liabilities are adjusted for the effects of changes in tax laws
      and
      rates on the date of enactment.





Net
      deferred tax liabilities consist of the following components as of June 30,
      2007
      and 2006:





2007
            
            
            2006Deferred
                tax assets:NOL
                Carryover
            
            $
            3,306,400
            
            
            $
            2,032,290Depreciation
            
            
            -
            
            
            
            58,260Allowance
                for Bad Debts
            
            
            10,514
            
            
            
            57,655Accrued
                Expenses
            
            
            197,067
            
            
            
            296,165Deferred
                tax liabilitiesDepreciation
            
            
            (4,422
            )
            
            
            -Valuation
                allowance
            
            
            (3,509,559
            )
            
            
            (2,444,370
            )Net
                deferred tax asset
            
            $
            -
            
            
            $
            -








The
      income tax provision differs form the amounts of income tax determined by
      applying the US federal income tax rate to pretax income from continuing
      operations for the years ended June 30, 2007 and 2006 due to the
      following:





2007
            
            
            2006Book
                Income
            
            $
            (1,174,535
            )
            
            $
            543,310Stock
                for Services
            
            
            86,790
            
            
            
            128,960Life
                Insurance
            
            
            23,290
            
            
            
            34,220Meals
                & Entertainment
            
            
            5,440
            
            
            
            5,065NOL
                Utilization
            
            
            -
            
            
            
            (711,555
            )Derivative
                Liability
            
            
            (34,626
            )
            
            
            -Valuation
                allowance
            
            
            1,093,641
            
            
            
            -$
            -
            
            
            $
            -





At
      June
      30, 2007, the Company had net operating loss carryforwards of approximately
      $8,600,000 that may be offset against future taxable income from the year 2007
      through 2027.  No tax benefit has been reported in the June 30, 2007
      consolidated financial statements since the potential tax benefit is offset
      by a
      valuation allowance of the same amount.





Due
      to
      the change in ownership provisions of the Tax Reform Act of 1986, net operating
      loss carryforwards for Federal income tax reporting purposes are subject to
      annual limitations.  Should a change in ownership occur, net operating
      loss carryforwards may be limited as to use in future years.





**12.**
            **Supplemental
                Disclosure of Cash Flow
                Information**





Non-Cash
      Transactions Disclosure for the Years Ended June 30, 2007 and
      2006:





2007
            
            
            2006Common
                stock issued for debt refinancing
            
            $
            -
            
            
            $
            15,750Common
                stock issued for debt conversion
            
            $
            -
            
            
            $
            3,473,606Property
                and Equipment purchased by capital lease
            
            $
            310,587
            
            
            $
            24,703





44


**13.**
            **Commitments
                and Contingencies**.





Operating
      Leases.


Under
      terms originally entered into in September 1998 for office space the Company
      paid $10,500 on a month-to-month basis through December 15,
      2006.  Total rent expense under this agreement for each of the years
      ended June 30, 2007 and 2006 was $57,750 and $122,000,
      respectively.





The
      Company has entered into a lease at 3160 Pinebrook Drive, Park City, UT,
      84098.  The Company will lease approximately 10,000 square feet for a
      period of 3 years, with an option to renew for an additional 3 year
      increments.  Monthly rent is $11,438 with annual increases of
      3%.





The
      payment terms are based on a step-rate lease and results in rent expense of
      the
      following:





Year
                Ending June 30,2008
            
            $
            139,9952009
            
            
            144,1952010,
                assumes renewal option exercised
            
            $
            148,520








**14.**
            **Employee
                Benefit Plan**





The
      Company offers an employee benefit plan under Benefit Plan Section 401(k) of
      the
      Internal Revenue Code.  In May of 2007, the Company changed its 401(k)
      provider and trustee from Fiserv/Alliance Benefit Group to Fidelity Investments.
      Employees who have attained the age of 18 are eligible to
      participate.  The Company, at its discretion, may match employee’s
      contributions at a percentage determined annually by the board of
      directors.  The Company does not currently match
      contributions.  There were no expenses for the years ended June 30,
      2007 and 2006.





**15.**
            **Series
                A Convertible Preferred Stock
                Offering**





On
      June 8
      and 22, 2007, Park City Group, Inc. completed the sale of 584,000 shares of
      its
      Series A Convertible Preferred Stock (“Preferred Stock”) to certain
      institutional and other accredited investors at $10.00 per share or
      $5,840,000.  These preferred shares carried with them registration
      rights for the underlying shares of common stock upon conversion as well as
      the
      common shares underlying the associated warrants, the registration statement
      was
      completed and became effective on August 13, 2007.  In connection with
      its sale of Preferred Stock, the Company entered into a Stock Purchase Agreement
      and Common Stock Purchase Warrant Agreement with each of the investors. Each
      of
      the investors was also issued common stock purchase warrants to purchase 1,000
      shares of the Company’s common stock for every $14,000 in the original issue
      price of the preferred stock issued at the closing. The warrants have a four
      (4)
      year term and will be exercisable at $4.00. Holders of the preferred stock
      are
      entitled to a 5.00% annual dividend payable quarterly in either cash or
      Preferred Stock at the option of the Company.  Offering cost
      associated with the placement included a commission paid to Taglich Brothers,
      Inc of $455,200 in cash and a warrant to purchase 194,667 shares of common
      stock
      and legal and other related fees of approximately $55,000.





**16.**
            **Stock
                Compensation Plans**




Stock
      in Lieu of Cash Compensation.****Beginning October 1,
      2002 and ending May 31, 2006, officers and management of the Company received
      a
      portion of their compensation in common stock of the Company.  The
      number of shares was calculated based on the fair value of the shares at the
      end
      of each payroll period, with a floor price of $2.50 per share.  During
      the year ended June 30, 2006 46,893 shares were issued with a fair value of
      $139,473.





Officers
      and Directors Stock Compensation.****In February 2004 to
      be effective January 2004, the Board of Directors approved the following
      compensation for directors who are not employed by the Company.


·
            Annual
                cash compensation of $10,000 payable at the rate of $2,500 per
                quarter.  The Company has the right to pay this amount in the
                form of shares of common stock of the
                Company.


·
            Annual
                options to purchase $20,000 of the Company restricted common stock
                at the
                market value of the shares on the date of the grant, which is to
                be the
                first day the stock market is open in January of each
                year.


·
            Reimbursement
                of all travel expenses related to performance of Directors duties
                on
                behalf of the Company.





As
      of
      June 30, 2007 there were outstanding to directors fully vested options
      outstanding to purchase 13,334 common shares at $3.00 per share, and expiring
      January 2008.





45


Officers,
      Key Employees, Consultants and Directors Stock Compensation.  In
      January 2000, the Company entered into a non-qualified stock option & stock
      incentive plan.  Officers, key employees, consultants and directors of
      the Company are eligible to participate.  The maximum aggregate number
      of shares which may be granted under this plan was originally 20,000 and was
      subsequently amended to 40,000 on March 8, 2000.  The plan is
      administered by a Committee.  The exercise price for each share of
      common stock purchasable under any incentive stock option granted under this
      plan shall be not less than 100% of the fair market value of the common stock,
      as determined by the stock exchange on which the common stock trades on the
      date
      of grant.  If the incentive stock option is granted to a shareholder
      who possesses more than 10% of the Company's voting power, then
      the
      exercise price shall be not less than 110% of the fair market value on the
      date
      of grant.  Each option shall be exercisable in whole or in
      installments as determined by the Committee at the time of the grant of such
      options.  All incentive stock options expire after 10
      years.  If the incentive stock option is held by a shareholder who
      possesses more than 10% of the Company's voting
      power, then the incentive stock option expires after five years.  If
      the option holder is terminated, then the incentive stock options granted to
      such holder expire no later than three months after the date of
      termination.  For options holders granted incentive stock options
      exercisable for the first time during any fiscal year and in excess of $100,000
      (determined by the fair market value of the shares of common stock as of the
      grant date), the excess shares of common stock shall not be deemed to be
      purchased pursuant to incentive stock options.





Effective
      June 30, 2006 the board of directors authorized the granting to the Company’s
      CFO warrants to acquire 80,000 shares of common stock at $3.25 per share with
      a
      five year term.





A
      schedule of the options and warrants at June 30, 2007 and 2006 is as
      follows:





Number
                ofOptions
            
            
            Warrants
            
            
            Price
                per ShareOutstanding
                at
            July
                1, 2005
            
            
            108,931
            
            
            
            943,830
            
            
            $
            1.50-7.00Granted
            
            
            13,334
            
            
            
            261,818
            
            
            $
            3.00-3.65Exercised
            
            
            -
            
            
            
            (58,572
            )
            
            $
            2.00Cancelled
            
            
            -
            
            
            
            -
            
            
            $
            1.50-4.00Expired
            
            
            (28,977
            )
            
            
            (250,239
            )
            
            $
            1.50-4.00Outstanding
                at
            June
                30, 2006
            
            
            93,288
            
            
            
            896,837
            
            
            $
            1.50-7.00Granted
            
            
            74,000
            
            
            
            611,804
            
            
            $
            2.76-4.00Exercised
            
            
            -
            
            
            
            -
            
            
            
            -Cancelled
            
            
            -
            
            
            
            -
            
            
            
            -Expired
            
            
            (41,412
            )
            
            
            -
            
            
            $
            2.00-7.00Outstanding
                at
            June
                30, 2007
            
            
            125,876
            
            
            
            1,508,641
            
            
            $
            1.50-4.00




The
          weighted-average grant-date fair value of options granted during years
          ended
          June 30, 2007 and 2006 were $3.07 and $3.00 per share,
          respectively.  The fair value for the options granted in 2007 and 2006
          were estimated at the date of grant using a Black-Scholes option pricing
          model
          with the following weighted-average assumptions:
 
 June
                    30, 2007
                
                
                June
                    30, 2006Risk-free
                    interest rate
                
                
                4.89%
                
                
                
                4.34%-5.16%Expected
                    life (in years)
                
                
                3
                
                
                
                2
–
                    5Expected
                    volatility
                
                
                123.76%
                
                
                
                369.58%Expected
                    dividend yield
                
                
                0.00%
                
                
                
                0.00%
 
 The
          following table summarizes information about fixed stock options and warrants
          outstanding at June 30, 2007:
  Options
                      and Warrants Outstanding
                    at
                      June 30, 2007
                  
                  Options
                      and Warrants
                    Exercisable
                      at June 30, 2007Range
                      of
                    exercise
                      prices
                  
                  Number
                    Outstanding
                      at
                    June
                      30, 2007
                  
                  Weighted
                      average
                    remaining
                      contractual
                    life(years)
                  
                  Weighted
                      average exercise  price
                  
                  Number
                    Exercisable
                      at
                    June
                      30, 2007
                  
                  Weighted
                      average
                    exercise
                      price$1.50
                      - $2.50
                  
                  538,218
                  
                  0.66
                  
                  $
                      1.98
                  
                  538,218
                  
                  $
                      1.98$2.76
                      - $3.50
                  
                  497,344
                  
                  3.72
                  
                  3.26
                  
                  497,344
                  
                  3.26$3.65
                      - $4.00
                  
                  598,955
                  
                  3.93
                  
                  3.89
                  
                  598,955
                  
                  3.891,634,517
                  
                  2.79
                  
                  $
                      3.07
                  
                  1,634,517
                  
                  $
                      3.07
 46


**17.**
            **Related
                Party Transactions**





In
      March
      2006, the Company obtained a Note Payable from a bank in the amount of
      $1,940,000.  Riverview Financial Corporation (Riverview), a wholly
      owned affiliate of the Company’s CEO, was the guarantor on this note payable and
      received a fee of 3% of the outstanding balance of the note payable as
      consideration for the guarantee. In March 2007 the Company set aside cash in
      a
      certificate of deposit to secure the note payable thus releasing Riverview
      Financial Corp as guarantor.  See note 9.





The
      Company has a revolving Line of Credit with Riverview to cover short term cash
      needs pursuant to a promissory note payable.  The credit facility has
      a maximum draw amount of $800,000 and bears interest at 12% with a fee for
      advances.  Repayments are made as funds are available, with a due date
      of June 15, 2007.  The revolving line of credit had no activity in
      Fiscal Year 2007 and upon expiration was not renewed.  See note
      7.





The
      Company had a note payable to Riverview Financial Corporation (Riverview),
      in
      the principal amount of $3,296,406 with accrued interest of
      $841,995.  In March 2006 the note payable and accrued interest of
      $294,334 were converted to 1,324,693 shares of common
      stock.   See Note 12.





Riverview
      had loaned the Company $345,000 under a note payable bearing interest at 18%
      and
      an extended due date of December 2006.  The loan was retired with cash
      proceeds from a note payable funding from a bank in March 2006.





In
      December 2002 the Company obtained a $2,000,000 note payable funding from Whale
      Investment, Ltd.  The note bore interest at 18%, payable monthly, and
      was due in December 2005, as extended.  Whale Investment, Ltd. is
      controlled by an individual who was already a shareholder of the Company at
      the
      time of the loan.  The extended note was due December 2005 and the
      Company paid to Whale Investments $40,000 in cash and 20,000 in common stock
      valued at $80,000 as consideration for the extension.  The note
      payable was retired with cash generated from operations in August
      2005.




**18.**
            **Change
                in Accounting Principle for Registration Payment
                Arrangements**





In
      December 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Staff Position on Emerging Issues Task Force (“EITF”) No. 00−19−2, Accounting
      for Registration Payment Arrangements (“FSP EITF 00−19−2”). FSP EITF 00−19−2
      provides that the contingent obligation to make future payments or otherwise
      transfer consideration under a registration payment arrangement should be
      separately recognized and measured in accordance with Statement of Financial
      Accounting Standards No. 5, Accounting for Contingencies, which provides that
      loss contingencies should be recognized as liabilities if they are probable
      and
      reasonably estimable.  Subsequent to the adoption of FSP EITF 00−19−2,
      any changes in the carrying amount of the contingent liability will result
      in a
      gain or loss that will be recognized in the consolidated statement of operations
      in the period the changes occur.  The guidance in FSP EITF 00−19−2 is
      effective immediately for registration payment arrangements and the financial
      instruments subject to those arrangements that are entered into or modified
      subsequent to the date of issuance of FSP EITF 00−19−2.  For
      registration payment arrangements and financial instruments subject to those
      arrangements that were entered into prior to the issuance of FSP EITF 00−19−2,
      this guidance is effective for our consolidated financial statements issued
      for
      the interim period beginning January 1, 2007.





On
      January 1, 2007, the Company adopted the provisions of FSP EITF 00−19−2 to
      account for the registration payment arrangement associated with the Company’s
      Offering and the Placement Agent warrants to purchase up to 181,818 shares
      of
      the Company’s common stock. As of January 1, 2007 and March 31, 2007, management
      determined that it was not probable that the Company would have any payment
      obligation under the Registration Payment Arrangement; therefore, no accrual
      for
      contingent obligation is required under the provisions of FSP EITF
      00−19−2.  Accordingly, the derivative liability account was
      eliminated.  The amount originally allocated to the derivative
      liability of $455,111 as well as the amount representing the cumulative
      revaluation of such derivative liability through the adoption of FSP EITF
      00−19−2, $88,785, was recorded as a cumulative-effect change in accounting
      principle against opening retained earnings.  The cumulative-effect
      adjustment was not recorded in the consolidated statement of operations and
      prior periods were not adjusted.




**19.**
            **Registration
                Payment Obligation**





In
      connection with registration rights agreements entered into with the sale of
      Common Stock in June 2006 and Series A Convertible Preferred Stock and warrants
      in June 2007, the Company may be obligated to pay liquidated damages if it
      fails
      to maintain the availability of the respective registration statements declared
      effective in January 2007 and August 2007, respectively and the inability of
      the
      Company to effectively complete and maintain the registration statements. The
      liquidated damages are computed as two percent (2%) of the aggregate Original
      Issue Price for each thirty (30) day period after a grace period of 45
      days.





·
            The
                maximum contingent obligation under the June 2006 agreement, based
                on an
                24% annual rate, is approximately $100,000 per month. This contingent
                obligation reduces pro rata as registrable shares are sold by investors
                or
                become eligible for sale under SEC Rule 144(k) without registration
                and
                all contingent obligations terminate in June
                2008.


·
            The
                maximum contingent obligation under the June 2007 agreement, based
                on a
                24% annual rate, is approximately $116,800 per month, subject to
                maximum
                liquidated damages of 12% or $700,800. The contingent obligation
                is
                reduced pro rata as registrable shares are sold by investors and
                is
                expected to terminate in June 2009 when the registrable shares may
                be sold
                without registration under Rule
                144(k)





Liquidated
      damages are payable in cash.





**20.**
            **Recent
                Accounting
                Pronouncements**







In
      May
      2005, the FASB issued SFAS No. 154, *“Accounting Changes and Error Correction
– a replacement of APB No. 20 and SFAS No. 3, Reporting Accounting Changes
      in
      Interim Financial Statements.”*SFAS 154 changes the requirements
      for the accounting for and reporting of a change in accounting
      principle.  It also applies to changes required by an accounting
      pronouncement in the unusual instance that the pronouncement does not include
      specific transition provisions.




47




In
      March
      2005, the FASB issued FASB Interpretation No. 47 (FIN 47) *“Accounting for
      Conditional Asset Retirement Obligations, an Interpretation of FASB Statement
      No. 143.”* This Interpretation clarifies that a conditional retirement
      obligation refers to a legal obligation to perform an asset retirement activity
      in which the timing and (or) method of settlement are conditional on a future
      event that may or may not be within the control of the entity. The obligation
      to
      perform the asset retirement activity is unconditional even though uncertainty
      exists about the timing and (or) method of settlement. Accordingly, an entity
      is
      required to recognize a liability for the fair value of a conditional asset
      retirement obligation if the fair value of the liability can be reasonably
      estimated. The liability should be recognized when incurred, generally upon
      acquisition, construction or development of the asset. FIN 47 is effective
      no
      later than the end of the fiscal years ending after December 15, 2005. The
      Company is in the process of evaluating the impact of FIN 47 but does not expect
      the adoption to have a material impact on the financial statements.




On
      July
      13, 2006, the Financial Accounting Standards Board issued Interpretation No.
      48,
*"Accounting for Uncertainty in Income Taxes, an interpretation of FASB
      Statement 109 (" FIN 48")",* which sets forth a specific recognition
      threshold and measurement method for the financial statement recognition and
      measurement of a tax position taken or expected to be taken on a tax return.
      The
      effective date of FIN 48 is for fiscal years beginning after December 15, 2006.
      The Company has not completed an assessment of the impact of FIN 48 on its
      financial statements.























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48